Landev, an Economic Model for Land Development

Valuation & ROI: Total Project

MV[44]DCF Valuation Rate ° 643  3
MV[25]Premium on Land Value to Add for IROR Calculation 643  1
MV[38]Starting Balance, Bottom Line (this input may be obsolete) 643  

The model will automatically calculate internal rate of return both on a debt free basis and on the basis of net cash flow to the developer. It also calculates net present value on both bases, and if the computer is instructed that one or more periods are historical periods it will calculate the net present value of future cash flows. If an income tax rate is input it will calculate these measures on a before taxes basis and on an after tax basis.

These measures of value and return assume that the acquisition price plus any other cash flows in the initial period are the appropriate investment against which to measure return. If the land was acquired some years ago and is worth considerably more than its basis, then today's market value may be a better indication of the investment against which return should be measured (because the owner must forego a bulk sale opportunity in order to develop the land). Therefore, the model is programmed to accept an input to indicate the value of the land in excess of basis. If this input is used, then the value and return measures above will be repeated on a market basis in addition to being reported on the basis of book value.

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