chapter 11 traditional investment criteria
DESCRIPTION
Chapter 11 Traditional Investment Criteria. Rules of Thumb Criteria General Characteristics Payback Period Methods Gross Income Multiplier Net Income Multiplier BTCF Multiplier (R e ) ATCF Multiplier. Chapter 11 Traditional Investment Criteria. Rules of Thumb Criteria - PowerPoint PPT PresentationTRANSCRIPT
Chapter 11Traditional Investment Criteria
Rules of Thumb Criteria– General Characteristics– Payback Period Methods
• Gross Income Multiplier
• Net Income Multiplier
• BTCF Multiplier (Re)
• ATCF Multiplier
Chapter 11Traditional Investment Criteria
Rules of Thumb Criteria– Average Rate of Return Methods
• Average Rate on Net Operating Income
• Average Rate on Before Tax Cash Flow
• Average Rate on After Tax Cash Flow
• Adjusting for Reversion
– Decision Rules– Limitations of Rules of Thumb
Chapter 11Traditional Investment Criteria
Ratio Analysis– Leverage and Operating Ratios
• Mortgage Debt to Property Value Ratio (LTV)
• Debt Coverage Ratio (DCR)
• Default Ratio (DR)
• Total Asset Turnover Ratio (TAT)
• Operating Expense Ratio (OER)
Chapter 11Traditional Investment Criteria
Ratio Analysis– Profitability Ratios
• Profit Margin Ratio
• Return to Equity on Total Investment
• Return on Equity
• “System of Financial Analysis”
– Limitations of Ratio Analysis
Chapter 11Traditional Investment Criteria
Traditional Appraisal Methods– Key Concepts
• Anticipation - TVM
• Change - Four Forces
• Substitution
• Contribution
Chapter 11Traditional Investment Criteria
Traditional Appraisal Methods– Sales Comparison Approach
• Comparable sales data– Selection
– How many comparables?
Chapter 11Traditional Investment Criteria
Traditional Appraisal Methods– Sales Comparison Approach
• Adjustment of sales data– Elements of comparison
» Property rights conveyed
» Conditions of sale
» Financing terms
» Market conditions
» Locational characteristics
» Physical characteristics
Chapter 11Traditional Investment Criteria
Traditional Appraisal Methods– Cost Approach
• Estimating site value• Estimating Building Cost
– Reproduction cost– Replacement cost
• Estimating accrued depreciation– Physical deterioration– Functional obsolescence– Economic obsolescence
• Entrepreneurial Incentive
Chapter 11Traditional Investment Criteria
Traditional Appraisal Methods– Income Approach
• Gross income multiplier
• Net income capitalization
• Discounted cash flow