August 1996, Vol 21, No 2

Abstract: Though the discounted cash flow analysis is a widely used method to estimate value for a real estate investment, the most reliable way to arrive at a discount rate is still being debated. This article proposes a compromise between the traditional 12 percent real estate return assumption and an overly theoretical analysis based on modern portfolio theory. The author outlines criteria for the selection of an appropriate discount rate and grounds the analysis to an actual case study of a retail property.