Summary
Samenvatting AR1MBE025 Building Economics calculation exam (AR1MBE025)
- Course
- Institution
Samenvatting AR1MBE025 Building Economics (AR1MBE025)
[Show more]
Seller
Follow
HvaBouuwkundeSTD
Reviews received
Content preview
AR1MBE025 - Building Economics - onlineWeek 1:
Cash flow diagrams visualise initial investment, value or cash flows vis future
cash flows
Future value (FV): value of money over time:
An investeer deposit 100 euro (CF) in 2% interest rate (r) account:
FV = CF(cash flow) *(1+ r)^T(time)
This is called compounding (finding future values) (intrest over intrest) (FV)
Discount is finding person values (PV)
Present value (PV): value of future cash flow at t=0
Present value calculation: conceding future cash flows in present value
An investment for 150 euro cash return in 3 years. With a interest rate of
3%
PV = CF/(1+r)^T
Lump sum: one time recipe t or expenditure occurring in a given periode
Index of inflation: Consumer price index (CPI)
Nominal cash flows: refer to absolute amount of money
Real cash flows: reflect the change in the purchasing power (inflation)
Nominal to real return conversion
Rr= ((1+Rn) / (1+Iinf)) -1
Rr - real return
Rn - nominal return
Iinf - inflation rate
Return measures
– Period by period (periodic return) every month 10%
– Multi period return (cumulative value) Even moth 10% how much % is
that in total after 3 moths?
internal rate of return (IRR): calculate an investment rate of
return without including external factors
= equal to the discount rate in present value calculation
= the 10% every moth not the 11% in total after 3 moths
,Net Present Value (NPV): sum of all present values of a series of in- and
outgoing cash flows at time zero.
If NPV = 0 IRR of the investment is equal to the discount rate used
If NPV < 0 IRR of the investment is lower than the discount rate used
If NPV > 0 IRR of the investment is higher than the discount rate used
PV = (CF1*(1+Rcpi)^t)/(1+r)^t
NPV = (CF1*(1+Rcpi)^t)/(1+r)^t + (CF2*(1+Rcpi)^t)/(1+r)^t etc..
! If the NPV is positive it is worth pursuing, it create value.
If the IRR is higher than the interest rate you are making profit
Return requirements investor:
● Risk-free interest rate (normally that of a state bonds) +
● Risk premium - Higher the risk = higher discount rate
Adding a 2% risk premium to a 3% interest rate: significant effect on income
with slightly higher discount rates.
– Required IRR: minimum rate of return determined by the investor at
the commencement of the investment, taking into account the risk
profile (forward looking).
– Property risk premium (object specific)
– Real estate risk premium (function specific)
– Risk-free interest rate (normally that of a state bonds)
– Expected IRR: the expected return of the investment given the cash
flow projection (forward looking).
– Actual IRR: return that is actually achieved at the end of the life of the
investment (backward looking).
, Opportunity Cost of Capital (OCC): what is the expected return of other
investment opportunities with a similar risk profile.
The Opportunity Cost of Capital is determined on the capital market
Week 2:
Operating Cash flow
. Below-line approach
. Above-line approach: CAPX included in calculation of NOI
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller HvaBouuwkundeSTD. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $6.91. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
51683 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 15 years now