Scenario Weighting

Probability-weights base, upside, and stress IRRs into an expected IRR and contrasts it with the simple three-way average. Inputs are the levered IRR and probability weight for each of the three scenarios.

By Devon Coombs, CPA, MBA · Teaching Professor of Finance, Santa Clara University · Reviewed August 2026

From the author: Devon Coombs, CPA, MBA teaches finance at Santa Clara University and works with corporate teams on practical AI.

AI training for finance teams · Consulting · The 10 Laws of Finance

Interactive Tool

Scenario Weighting

Base case

Levered IRR

Probability weight

Upside case

Levered IRR

Probability weight

Stress case

Levered IRR

Probability weight

Probability-weighted IRR

14.1%

expected return

Simple average

13.7%

ignores the weights

The weighted IRR (≈14.1%) differs from the 13.7% simple average because the weights are a statement of confidence. Shift weight toward the stress case and the expected return falls, that is the conviction made explicit.

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This calculator comes from the free Real Estate Finance course, where the concept is taught with readings, worked examples, and practice questions.

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Built by Devon Coombs, CPA, MBA, Teaching Professor of Finance at Santa Clara University.