I work in commercial real estate and we are trying to back into a purchase price by determining what initial outlay gets our NPV to 0 and IRR to 30%. Essentially, what acquisition price gets us to a 30% IRR. We're looking at this over a three year period. For purposes of simplicity, say I can buy an income-generating property at 50,000 and we're looking to finance 80% of the purchase ($40,000). Assume about $2,500 in closing costs. We'll make $6,000 (NOI in cash flow in year 1 - 3 and sell the asset in year three for 65,000.
What we're trying to do is figure out what purchase price will yield us a 30% IRR and an NPV of zero. We've tried figuring it out using the Goal Seek function, but have kept coming across issues due to circular references.
What we're trying to do is figure out what purchase price will yield us a 30% IRR and an NPV of zero. We've tried figuring it out using the Goal Seek function, but have kept coming across issues due to circular references.
