Understanding IRR and NPV

Internal rate of return (IRR) has proven to be a valid and successful tool in measuring investment performance. Yet despite its success there are detractors within the commercial real estate industry who believe IRR is limited in its ability to gauge a forecasted rate of return.

Net present value (NPV) is another worthwhile and valid measurement for investment selection. It also serves as a great tool for users in their decision-making process.

In this course you are provided a detailed look at IRR and NPV. Starting with the historical perspective of these concepts, you’ll understand why IRR and NPV are two of the most commonly used tools in the commercial real estate industry today. This course will show you that IRR and NPV are valid investment performance measures with few limitations – it will dispel the detractors! Combined these two concepts provide a dynamic one-two punch when choosing profitable commercial real estate investments.

After completing this course, students will be able to:
•	Identify the origins of some of the common analysis concepts used throughout the industry today
•	Use Excel-based analysis software to calculate IRR and NPV
•	Identify the limitations of IRR and how these limitations can be overcome
•	Define NPV and identify how the concept measures investment performance
•	Define IRR and identify how the concept measures investment performance
•	Access the IRR/NPV crossover chart to determine the percentage point at which an investment preference changes
•	Use the IRR and NPV processes in tandem to forecast a more accurate investment analysis

Other Online Education Courses
Sale Leaseback Analysis: User Perspective
Sale Leaseback Analysis: Investor Perspective
Commercial Investment Real Estate Taxation
Commercial Investment Real Estate Disposition Strategies
Lease vs. Own Analysis Using Excel-Based Tools