|
The On Target real estate investment software calculates both a
modified internal rate of return ( MIRR ) and an internal rate of return
(IRR). The IRR
calculation can exaggerate the average return on an investment since it runs
the cash flows forward at an internal rate, the same rate as the
overall project. If the IRR is 20% in year 10, the cash flows
are ran forward at 20% for each year 1 through 10. If the IRR is 2%, the cash flows are ran
forward at 2%.
Because the IRR can exaggerate the average return on investment,
the On Target software also calculates a modified internal rate of return.
You determine at what rate the cash flows should be ran forward at
based on how you will invest the cash flows.
The MIRR calculation uses the initial investment amount, a series of
projected after-tax cash flows which are ran forward at a rate that you
supply and the after-tax sales proceeds in a given year to calculate
a Future Wealth dollar amount for years 1 through 10. An
average year-to-year return is then calculated using the initial
investment amount and the future wealth dollar amount for each of
the ten years.
MIRR Example: If we are looking at year 5,
we would use the initial investment amount, the series of after-tax cash
flows for years 1 through 5, the after-tax return on the cash flows
based on the interest rate that you supply and the after-tax sales
proceeds in year 5 to calculate a future wealth dollar amount for
year 5. We then take your initial investment amount and the
Future Wealth dollar amount that was calculated for year 5 and
determine an average yearly return that would be required to
accumulate the future wealth amount over the five year period.
The MIRR calculation provides a better average return estimate
since you supply the anticipated rate of return to run the cash
flows forward at. The cash flows are not ran forward at an
internal rate that could greatly exaggerate your return on
investment.
The On Target real estate investment analysis software calculates
both an internal rate of return and a modified internal rate of
return. Any top notch real estate investment software that you
purchase should calculate an MIRR in addition to an IRR.
As we
mentioned above, the IRR can exaggerate your average return. When
making a large investment, it is is important to have an accurate
financial picture. On Target gives you that advantage.
To order On Target for only $97.95, click on
Purchase
Software To
find out more about the many features offered in the On Target
software, go to
Software Features The On Target real estate
software includes a 30 day money back guarantee and free support. ©
Copyright 2000 - 2010 Advantage Software LLC |
