Reilly formula
The Reilly Formula is a way that people use to measure the value of something like a business, a company, or even a building. It's like when you want to check how much your toy is worth, but instead of just guessing, you use some special math to figure it out.
The Reilly Formula uses a few different things to help figure out the value. One of these things is called the net operating income, which means how much money the thing you're trying to value makes after paying for all its expenses like rent or salary.
Another thing the Reilly Formula uses is something called a capitalization rate. This is like how much interest you would earn if you put your money in the bank. It's a way of figuring out how much people would pay for something like a building or a company based on how much money it makes.
So, to use the Reilly Formula, you take the net operating income and divide it by the capitalization rate. This gives you an estimate of how much the thing you're trying to value is worth.
For example, let's say you have a lemonade stand that makes $100 a day after paying for lemons and cups. Using the Reilly Formula, you figure out that the capitalization rate for lemonade stands is 10%. You would then divide $100 by 10%, which equals $1,000. So, your lemonade stand is worth around $1,000 according to the Reilly Formula.
Overall, the Reilly Formula is a way of figuring out how much something is worth based on how much money it makes and how much people would be willing to pay for it.
The Reilly Formula uses a few different things to help figure out the value. One of these things is called the net operating income, which means how much money the thing you're trying to value makes after paying for all its expenses like rent or salary.
Another thing the Reilly Formula uses is something called a capitalization rate. This is like how much interest you would earn if you put your money in the bank. It's a way of figuring out how much people would pay for something like a building or a company based on how much money it makes.
So, to use the Reilly Formula, you take the net operating income and divide it by the capitalization rate. This gives you an estimate of how much the thing you're trying to value is worth.
For example, let's say you have a lemonade stand that makes $100 a day after paying for lemons and cups. Using the Reilly Formula, you figure out that the capitalization rate for lemonade stands is 10%. You would then divide $100 by 10%, which equals $1,000. So, your lemonade stand is worth around $1,000 according to the Reilly Formula.
Overall, the Reilly Formula is a way of figuring out how much something is worth based on how much money it makes and how much people would be willing to pay for it.