From the course: Real Estate Analysis Foundations
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Cash multiple - Microsoft Excel Tutorial
From the course: Real Estate Analysis Foundations
Cash multiple
- All right, now let's look at a concept called the cash multiple. This is something that is frequently used in combination with the internal rate of return. And it's actually a very, very simple concept. The idea is if you put in one dollar into an investment, how much do you get back for every dollar that you put in? So let's look at an example here where two projects give a two x multiple, cash multiple. Both investments double your money. So do they give you the same return? Now the two x means you put a dollar in, you get $2 back. So you get your original dollar plus you get a dollar of profit. So that's how you get a two x multiple; and, basically, it means doubling your money. So if it was a one x multiple, it means you just got your original investment back. So now we have two projects that both have a 2.0 cash multiple. That means they both double your money. So are the projects the same? Well, if you remember from the internal rate of return and our discounted cash flow…
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Contents
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Intro to measures of returns1m 48s
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Discounted cash flow and the net present value (NPV)5m 37s
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Discount rate2m 42s
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Net present value exercise7m 34s
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Internal rate of return2m 34s
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Internal rate of return exercise4m 24s
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Cash multiple1m 58s
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Which measure to use?6m 3s
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Which measure to use? Part 24m 51s
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The terminal value5m 53s
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Yields and cap rates8m 38s
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Summary of measures of return7m 49s
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