Internal Rate of Return and Real Estate

Internal Rate of Return
Knowledge Center

Forum

New Topic

Craig Sanders

Internal Rate of Return and Real Estate

As an example if an owner puts up $7,500,000 equity to buy an office building. After 10 years it threw of $7,000,000 of cash flow. The owner wants to turn the project over to a management company to manage. If IRR is used to see how well the manager does what is considered the equity investment to use at the starting point in year 11?

  Leon Ploubidis
Manager, Australia
 

Opportunity Cost

It needs to be the market value at the time, not the original purchase price. In Capital Budgeting, we need to account for Opportunity Cost in the cash flows, and this includes the value you could sell the property for today. So, to break down, the current market value is essentially the original purchase price, plus the opportunity cost.

Participate and leave a comment
Exchanging your ideas stimulates your personal and professional development. And you can help other people! Please motivate your point of view. You can still edit your comment for 3 hours.

Start a new forum topic

 

More on Internal Rate of Return
Summary
Forum
Flat Rate versus Internal Rate of Return (IRR)
Calculating the Rate of Return
Internal Rate of Return and Real Estate
TVM versus Internal Rate of Return (IRR)
Internal Rate of Return (IRR) Based KPIs
Internal Rate of Return (IRR) in Real Value?
🔥Advantages of Internal Rate of Return (IRR) Method
Best Practices
Internal Rate of Return (IRR) versus ROE versus ROA
Internal Rate of Return (IRR) Formula
Calculating Internal Rate of Return
Weaknesses of Internal Rate of Return (IRR)
Special Interest Group

Are you interested in Internal Rate of Return? Sign up for free

Notify your students

Copy this into your study materials:

and add a hyperlink to:

Link to this discussion

Copy this HTML code to your web site:

Internal Rate of Return
Knowledge Center



About 12manage | Advertising | Link to us / Cite us | Privacy | Suggestions | Terms of Service
2021 12manage - The Executive Fast Track. V15.8 - Last updated: 9-5-2021. All names of their owners.