Cash Flow Shortfall Modeling Question
When looking at a potential commercial acquisition, I'm modeling a lot of negativein years 2 and 3 of my hold as I'm assuming the single tenant 100% vacates. If I want to fund all negative cash flow associated with downtime/leasing/etc. upfront with equity day 1, would I show the periods with the negative cash flow as $0? Or still as negative values? I'm talking in terms of the calculation. So as an example:
-There is $1M of negative free cash flow in year 2 due to downtime/lease-up costs
-I'm including $1M in my uses at closing as a part of equity to fund this missing cash flow
-Because I'm funding this shortfall at close, would the IRR calculation include those negative cash flows still or would I show those periods as $0 as they would be drawn out of the entity's account balance?