Enter the total pre-tax cash flow generated by your investment and the actual cash invested into the calculator. The calculator will display your cash on cash return ratio.
Cash on Cash Return Formula
The following formula is used to calculate the cash on cash return of an investment.
COCR = CF / I
- Where COCR is the cash on cash return ratio
- CF is the annual, pre-tax cash flow
- I is the total cash invested
How to calculate cash on cash return
- First, determine the total amount invested
This is the total cash invested in the asset.
- Next, determine the annual pre-tax cash flow
This is the total income/cash flow your new investment is generating on a yearly basis.
- Finally, calculate the COCR
Calculate the cash on cash return of your investment using the equation above and the information from steps 1 and 2.
FAQ
Cash on cash return is a measure of the annual cash earned from an investment with respect to the total amount of money invested.
In general, a 20% yearly cash on cash return is a solid cash on cash return. In short, this means the investment will pay for itself in 5 years. The greater the return, the quicker the payoff.
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