Study On Deciding I_c In Commercial Real Estate Project

Now commercial real estate becomes a new investment hotspot in our country. At the same time it affronts the international and internal pressure. If our speculators, developers, investment institutions and investors of commerce want to make their commercial real estate projects succeed, they must make a correct decision. Decision-making usually uses the methods of Net Present Value and Internal Rate of Return. The two models all must use the parameter I_c. It is the norm and criterion of Internal Rate of Return, the financial minimum demand and the discount of Net Present Value. Obviously, it's first-line for the commercial real estate investment to make certain the parameter I_c.The article starts with the conception of commercial real estate, introduces outer investment model and capital system according to America, expatiates our commercial real estate development process, analyses the characteristic of commercial real estate. The key of making certain I_c is to ascertain risk reward rate, so the article briefly introduces the commercial real estate's risk factors. Because it's primary to discuss how to make certain I_c of commercial real estate project, the author collect all outland and inland methods, including Social Discount Rate, Adding Summation Model, Weighted Average Cost of Capital, Delphi Model and Capital Assets Pricing Model. Then it analyses their advantages and disadvantages when they are used in our market. It brings forward the two main problems to make certain I_c of commercial real estate project in our market is to take into account financing and risk. By analyzing, we know the coefficient p of Capital Assets Pricing Model reflects the risk and Weighted Average Cost of Capital can resolve the financing. Thus we produce the model of Weighted Average Cost of Capital combining Capital Assets Pricing in our market. It's important to make certain the social average investment yield I_m and the coefficient p. The article introduces how to amend the investment yields of the companies of having come into the market on the time, the area and separate factors, then account out I_m and p. After that we can get I_c combing Weighted Average Cost of Capital Model to solve the financing. At last we utilize it to the practicalcase, obtain an appropriate result, and confirm the feasibility of the new method. Of course, because it's in leading strings, it's inevitable to bring new problems and confronted with new challenge.