An Analysis of the Use of Discounted Cash Flow Methods
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Surveys of firms outside the property sector indicate the growth in the use of DCF methods such as the NPV and IRR methods to evaluate projects as compared to the use of such na?ve methods as Payback and the Accounting rate of return. The growing convergence of theory and practice is indicated by the growing use of the NPV method. The objective of this study is to determine the capital budgeting methods used to evaluate real estate development projects and to compare the results of a survey with the results of other studies. The thesis finds that that over 90% of all respondents are using a combination of NPV and IRR methods most often to evaluate development opportunities. Interestingly, 85% of all respondents are also using the payback period. Other methods used are the profitability index, residual value, free cash flow, economic value, and return on equity. Developers have adopted DCF methods such as NPV and IRR as the primary methods to evaluate projects rather than na?ve methods such as Payback and ARR, although these latter methods remain in use. The use of decision tree analysis and real option analysis is very limited
Format:Paperback
Language:English
ISBN:383831381X
ISBN13:9783838313818
Release Date:November 2009
Publisher:LAP Lambert Academic Publishing
Length:104 Pages
Weight:0.36 lbs.
Dimensions:0.3" x 6.0" x 9.0"
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