Cash on Cash

Two questions about cash on cash

1. Do you calculate the reversionary value on your average cash on cash calculation?

2. Technically since you are paying out the investor over the hold period does the denominator of cash in the deal go down?

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to both questions, the answer is no. If you factor return of capital, its now "return of cash". Cash on Cash is just a more colloquial way of saying equity dividend yield. The metric is simple, how much "cash" you get divided by how much cash you put in, on an annual basis. It's called "cash on cash" because depreciation can reduce taxable net income and the cash tax payment. 

 

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