“You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur “ I AM YOUR LAND / INDUSTRIAL AND INVESTMENT SPECIALIST / LOOKING FOR OWNERS Call me if you want to sell your property and need an estimated value. Direct : 602-759-1209, Prefer cell: 520-975-5207 or email me email@example.com. A CLICK HERE TO VIEW ALL MY $ 60 MIL OF LISTINGS .
What does IRR actually mean?
Internal rate of return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments. Internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero. IRRcalculations rely on the same formula as NPV does.
Jan 18, 2018 https://www.investopedia.com/terms/i/irr.asp
The following is the formula for calculating NPV:
To calculate IRR using the formula, one would set NPV equal to zero and solve for the discount rate (r), which is the IRR. Because of the nature of the formula, however, IRR cannot be calculated analytically and must instead be calculated either through trial-and-error or using software programmed to calculate IRR.
Generally speaking, the higher a project’s internal rate of return, the more desirable it is to undertake. IRR is uniform for investments of varying types and, as such, IRR can be used to rank multiple prospective projects on a relatively even basis. Assuming the costs of investment are equal among the various projects, the project with the highest IRR would probably be considered the best and be undertaken first.
IRR is sometimes referred to as “economic rate of return” or “discounted cash flow rate of return.” The use of “internal” refers to the omission of external factors, such as the cost of capital or inflation, from the calculation.
BREAKING DOWN Internal Rate of Return – IRR
You can think of internal rate of return as the rate of growth a project is expected to generate. While the actual rate of return that a given project ends up generating will often differ from its estimated IRR, a project with a substantially higher IRR value than other available options would still provide a much better chance of strong growth. One popular use of IRR is comparing the profitability of establishing new operations with that of expanding existing ones. For example, an energy company may use IRR in deciding whether to open a new power plant or to renovate and expand a previously existing one. While both projects are likely to add value to the company, it is likely that one will be the more logical decision as prescribed by IRR.
Internal Rate of Return in Practice
In theory, any project with an IRR greater than its cost of capital is a profitable one, and thus it is in a company’s interest to undertake such projects. In planning investment projects, firms will often establish a required rate of return (RRR) to determine the minimum acceptable return percentage that the investment in question must earn in order to be worthwhile. Any project with an IRR that exceeds the RRR will likely be deemed a profitable one, although companies will not necessarily pursue a project on this basis alone. Rather, they will likely pursue projects with the highest difference between IRR and RRR, as these likely will be the most profitable.
IRR can also be compared against prevailing rates of return in the securities market. If a firm can’t find any projects with IRR greater than the returns that can be generated in the financial markets, it may simply choose to invest its retained earnings into the market.
Although IRR is an appealing metric to many, it should always be used in conjunction with NPV for a clearer picture of the value represented by a potential project a firm may undertake.
Internal Rate of Return Issues
While IRR is a very popular metric in estimating a project’s profitability, it can be misleading if used alone. Depending on the initial investment costs, a project may have a low IRR but a high NPV, meaning that while the pace at which the company sees returns on that project may be slow, the project may also be adding a great deal of overall value to the company.
A similar issue arises when using IRR to compare projects of different lengths. For example, a project of a short duration may have a high IRR, making it appear to be an excellent investment, but may also have a low NPV. Conversely, a longer project may have a low IRR, earning returns slowly and steadily, but may add a large amount of value to the company over time.
Another issue with IRR is one not strictly inherent to the metric itself, but rather to a common misuse of IRR. People may assume that, when positive cash flows are generated during the course of a project (not at the end), the money will be reinvested at the project’s rate of return. This can rarely be the case. Rather, when positive cash flows are reinvested, it will be at a rate that more resembles the cost of capital. Miscalculating using IRR in this way may lead to the belief that a project is more profitable than it actually is. This, along with the fact that long projects with fluctuating cash flows may have multiple distinct IRR values, has prompted the use of another metric called modified internal rate of return(MIRR). MIRR adjusts the IRR to correct these issues, incorporating cost of capital as the rate at which cash flows are reinvested, and existing as a single value. Because of MIRR’s correction of the former issue of IRR, a project’s MIRR will often be significantly lower than the same project’s IRR.
How could 3 hours change your financial future ?
In three hours, you could squeeze in another round of golf. Or you take the first step towards your dream retirement. At Online Trading Academy, We’ve helped thousands of people take control of their financial future with a patented strategy designed to help you make money in any market, – Whether it’s moving up, down or sideways. Sign up for a free half-day class and start learning the secrets of professional investors.
SEE IT ALL: https://www.investopedia.com/terms/i/irr.asp
Phoenix Commercial Real Estate and Investment Real Estate: Investors and Owner / Users need to really know the market today before making a move in owner user Commercial Properties, Investment Properties and land in Phoenix / Maricopa County, Pinal County / Arizona, Properties and Investment Properties. I am marketing my listings on Costar, Loop-net CCIM, Kasten Long Commercial Group. I also sold hundreds millions of dollars’ worth of Investment Properties / Owner User Properties in Retail, Office Industrial, Multi-family and Land in Arizona and therefore I am working with brokers, Investors and Developers. I am also a CCIM and through this origination ( www.ccim.com ) I have access to marketing not only in the United States, but also international as the market has a lot of moving parts today. What is going on socio-economically, what is going on demographically, what is going on with location, with competing businesses, with public policy in general — all of these things affect the quality of selling or purchasing your Commercial Properties, Commercial Investment Properties and Commercial and large tracts of Residential Land Therefore, you need a broker, a CCIM (Certified Commercial Investment Member) who is a recognized expert in the commercial and investment real estate industry and who understands Commercial en.wikipedia.org/wiki/CCIM I AM YOUR LAND / INDUSTRIAL AND INVESTMENT SPECIALIST / LOOKING FOR OWNERS CLICK HERE TO VIEW ALL MY $ 60 MIL OF LISTINGS PLEASE CALL ME – Direct : 602-759-1209 , cell: 520-975-5207 or email me firstname.lastname@example.org
WEEKLY LAND SALES
“The major fortunes in America have been made in land.” John D. Rockefeller
WEEKLY INDUSTRIAL SALES:
I AM YOUR LAND / INDUSTRIAL AND INVESTMENT SPECIALIST / LOOKING FOR OWNERS CLICK HERE TO VIEW ALL MY $ 60 MIL OF LISTINGS
Walter Unger CCIM
Phoenix , AZ 85018
“You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur “ ARE YOU READY TO SELL OR PURCHASE YOUR INDUSTRIAL / OFFICE OR RETAIL BUILDING OR YOUR LAND in Phoenix, Maricopa County and Pinal County, Arizona, please call me. Office: 602-445-4113, Direct : 602-759-1209 , cell: 520-975-5207 or email me email@example.com. … CLICK HERE TO VIEW ALL MY LISTINGS.
Let me know if you are interested in Apartments: CLICK HERE FOR APARTMENTS FOR SALE
- DEMOGRAPHIC FACTS ABOUT MARICOPA COUNTY:
- The average age of the population is 34 years old.
- The health cost index score in this area is 102.1. (100 = national average)
- Here are some of the distributions of commute times for the area: <15 min (22.7%), 15-29 min (36.8%), 30-44 min (25.1%), 45-59 min (8.6%), >60 min (6.8%).
Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Properties in Phoenix, Tucson, Arizona.
Walter Unger CCIM
“You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur “
Also Call me if you need an estimated value of your Property.
Call me if you want to see a map with what is in the Construction Pipeline for Apartments.
Kasten Long Commercial Group tracks all advertised apartment communities, including those advertised by other brokerages. The interactive map shows the location of each community (10+ units) and each location is color coded by the size (number of total units).
Walter Unger CCIM, CCSS, CCLS
I am a successful Commercial / Investment Real Estate Broker in Arizona now for 20 years. If you have any questions about Commercial / Investment Properties in Phoenix or Commercial / Investment Properties in Arizona, I will gladly sit down with you and share my expertise and my professional opinion with you. I am also in this to make money therefore it will be a win-win situation for all of us.
Please reply by e-mail firstname.lastname@example.org or call me on my cell 520-975-5207
Delivering the New Standard of Excellence in Commercial Real Estate
- Commercial Real Estate Scottsdale
- Commercial Real Estate Phoenix
- Commercial Real Estate Arizona
- Commercial Investment Properties Phoenix
- Commercial Investment Properties Scottsdale
- Commercial Investment Properties Arizona
- Land Specialist Arizona
- Arizona Land Specialist
- Land Specialist Phoenix
- Phoenix Land Specialist
- Land For Sale Phoenix
- Land for sale Arizona
- Commercial Properties For Sale Phoenix
- Commercial Real Estate Sales Phoenix
- Commercial Properties Phoenix
- Commercial Properties Arizona
- Commercial Land Specialist Phoenix
- Commercial Land Phoenix
- Multifamily land Phoenix
- Retail Land Phoenix
- Industrial Land Phoenix
- Land Commercial Phoenix
- Land Retail Phoenix
- Land Industrial Phoenix
- Land Multifamily Phoenix
- Industrial Land for sale Phoenix
- Land Industrial
- Investment Real Estate
Disclaimer of Liability
The information in this blog-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.