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IRR is the discount rate required to make NPV = 0. If IRR is significantly better than the perceived discount rate, on paper it looks like a good investment... not following here. They are essentially the same calculation, just solving for a different part of the equation.
Agreed. I guess I was coming at it differently in that: why do we use a capitalisation method for real estate valuations as opposed to a corporate DCF method (with cost of equity, WACC, terminal growth rate assumptions and all). Then started wondering if I modelled out a real estate project like a corporate DCF, would the output TEV / EV (or GAV / NAV I guess) be reconcilable to a set of real estate cashflows for a given target levered IRR.
If talking about the 3 valuations method, the DCF approach is a part of the income approach methodology.
Unlike a corporate operating business, where projecting out future performance is simple and accurate.
DCF is the most common valuation method for commercial real estate. Is this thread AI generated?
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