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.
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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
Cash On Cash Return Definition
A cash on cash return is defined as the ratio of pre-tax cash flow to the total cash invested in a given asset.
Cash on Cash Return Example
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.
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 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.