The investment-to-cost ratio (ITC) is the number of investment dollars divided by the total cost of a project. As a result, ITC helps equity investors determine how much they’d be willing to budget toward their project participation.
Investment-to-cost ratio formula
To calculate ITC, use this equation:
ITC = invested amount ÷ total project cost
Total project cost includes the costs of purchasing the property, of course, as well as any further construction such as demolition or renovation. It also includes any related design, engineering and permitting costs.
Invested amount refers to the total amount capital participants put toward the project. Conventionally, ITC focuses on equity investment only. Loan-to-cost ratio (LTC) is the analogous formula for debt investment.
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