Residential Economic IRR Calculations: Base Case

Given:

A development of a track of homes is being considered for the West part of the local city. The developer has estimated the project will take 12 months. The forecast development costs are: Months 1-6 at an expenditure rate of $1,000,000 per month and the expenditure rate for months 7-12 are $250,000 per month. Homes will be sold beginning in the sixth month with forecast gross income for month’s 6-9 of $1,000,000 per month and for month’s 10-12 income of $3,000,000 per month.

Determine:

a) Internal Rate of Return for the project

b) The simple payback period

c) The discounted payback at MARR of 36%

d) NPV at 10% /yr. interest rate