In the previous post we discussed various excel formulas to calculate IRR, and we know for sure that the modified internal rate of return (MIRR) is a better performance indicator than the internal rate of return (IRR). But why don’t we always calculate MIRR or use Excel MIRR formula, rather than still using IRR as a performance indicator? Do you calculate MIRR? Why or why not? I have rarely seen any analyst using Excel MIRR formula. From investment banking to project finance, we always use IRR. Internal rate of return (IRR) has some inherent problems and modified internal rate of
We have all read about the Harvard economists Reinhart and Rogoff’s most famous finding that countries with a debt exceeding 90 per cent of their annual GDP experienced slower growth than their thriftier peers, being debunked by a 28-year-old student. Thomas Herndon, a graduate in the economics department at Amherst College in Massachusetts, found that they had made fundamental mathematical errors because of a botched Excel spreadsheet. More detail about this can be found here. You may also have read about the JPMorgan Chase’s trading loss of $6.2 billion was caused by an Excel error in copying and pasting data.
IRR calculation in Excel can be done using three different formulae – IRR, XIRR and MIRR. In this post we will be discussing syntax and specific use of each formula. If you want to understand the basic of IRR calculation in general, you must see this post NVP & IRR ? Key Metrics of a Feasibility Analysis.? Syntax and Description Below are the syntaxes and descriptions of each formula for the ?IRR calculation: =IRR(values() [, guess ] ) Where values() is the array of cash flow values and guess is an optional variable specifying value you estimate will be returned
Feasibility study is a critical part of a new development project. The purpose of the feasibility study is to determine whether the development is technically and financially feasible to move forward with. In the previous post I have discussed about the mistakes to avoid when doing real estate feasibility study. And in this post I will be discussing some other factors to consider while doing feasibility study for real estate development projects. 1. Limited market research is a dangerous thing: Many a time we are tempted to assume things and feasibility study is no exception. It should be noted that
Real estate companies too go bankrupt, though it not as common as investment banks. In this post we will be discussing a few major reasons for the bankruptcy of real estate companies, and look at few real life examples. Large institutional real estate companies generally maintain a huge portfolio of income generating properties. Acquisitions of these properties are generally financed by large amount of debt and other debt instruments. Most of these real estate assets are generally financed such that each asset is individually burdened with its own debt; real estate companies create special purpose vehicles (SPVs) for this purpose.
Everyone is talking about big data these days, and why urban planners should be left behind. And I think it is a good thing that big data is being used by urban planner to design and develop smart cities. I this post I will give you an update what is happening on this front and what are the resources available to you if you want to explore further.
We are pleased to announce the launch of our free e-book Beginners’ Guide to Real Estate Financial Terms. This e-book covers major financial terms used in real estate finance and investment. Most of the terms are explained with the help of simple example for easy understanding. The language is simple and as the title says, it is for the beginners. We occasionally cover these terms in our posts in much detail and often discuss the complexities associated. Please be advised that this is not a real estate terminology book, it rather deals with financial concepts used in real estate investment.
Sometimes calculating project IRR and equity IRR can be tricky, and in this post we will discuss the reasons for the same. The internal rate of return (IRR) can be defined as the rate of return that makes the net present value (NPV) of all cash flows equal to zero. In a previous post I have discussed the basic concepts and calculation of IRR and NPV. If you want to refer back, click here for the IRR-NPV post. Calculation of the internal rate of return considering only the project cash flows (excluding the financing cash flows) gives us the project