Book

Description

This study introduces and evaluates the Leveraged Wealth Growth Rate (LWGR), a complementary measure for assessing debt-financed investments. Rather than replacing established metrics such as NPV, IRR, or MIRR, LWGR focuses on the relationship between total committed equity and equivalent wealth at a selected focal date, typically the debt-payoff date. The method normalizes negative equity cash flows to the initial period, adjusts positive distributions received before debt payoff to the focal date, and discounts later positive cash flows using an explicit equity valuation rate. The study develops the mathematical properties, interpretation limits, and practical implications of the measure through analytical results and 75 deterministic computational experiments based on a stylized rental-property model. Findings show that LWGR is sensitive to financing structure, valuation assumptions, and the selected focal date, while also revealing important interactions between debt maturity, equity contribution, operating conditions, and future cash flows. The analysis also establishes specific relationships with MIRR and NPV under restricted conditions. Overall, LWGR is presented as a transparent supplementary valuation descriptor—not a universal investment-selection rule. Its most appropriate use is alongside NPV, liquidity and funding requirements, and a clearly stated focal date, helping analysts distinguish value creation, financing feasibility, and the timing of wealth generation in leveraged investments.