Real estate investment analyst interview questions shared by candidates
Would IRR be higher for a property generating high cash flow, or one generating nothing at all?
IRR is higher for property generating no cash flows, since it carries greater risk.
I hope you didn't tell them that. In fact, the IRR is the rate which allows all incoming and outgoing cash flows to be equal. The question is a bit ambiguous considering the IRR is also heavily dependent on the money invested (outgoing). With respect to the question, if you are receiving high returns relative to the amount invested, that would lead to a higher IRR. In fact, an investment that generates nothing at all would have an IRR of -100%. Hope this helps anyone who actually receives a poorly worded question like this. Extra bit of help: IRR > Risk free rate of return -> Project should be considered IRR You just lost your company a lot of money
I see this question as really asking: "Do you know the definition of an IRR?" since the original question is so ambiguous. It merits a discussion of IRR rather than a yes/no answer.
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