What is defined as the discount rate that equates the present value of cash inflows to the present value of cash outflows?

The definition given in the question refers to the Internal Rate of Return (IRR). The IRR is a crucial concept in real estate and finance because it represents the discount rate at which the net present value (NPV) of cash inflows equals the net present value of cash outflows. In other words, it is the rate at which an investment breaks even in terms of the present value of its returns.

When assessing investment opportunities, real estate professionals often calculate the IRR to understand how effectively an investment is expected to generate returns over time. If the IRR exceeds the required return or hurdle rate for a project, it indicates that the investment is likely to be a good one, as it is generating sufficient returns relative to its costs.

The other options do not represent this specific concept. Return on Equity is related to the profitability of an investment relative to shareholders’ equity, Capitalization Rate pertains to property valuation and income generation, and Tax Rate refers to the percentage of income taken as tax, none of which equate cash inflows to cash outflows as the IRR does. Understanding IRR is vital for real estate professionals when making informed investment decisions.