Suppose a real estate investor owns several real estate investments, each purchased at "informationally efficient" prices (i.e., where all relevant information about the assets is known prior to purchase for this tax cohort. In other words, where each investment was purchased with a zero net present value).

 a) What is the impact on the investor of adding another real estate investment also with a net present value of zero?

b) If mortgage debt is used to purchase real estate investments, how does this decision make investors better off? Explain.

c) Should an investor finance the investment with all case, or with a small, medium or large mortgage? Why?

Answer rating: 100% (QA)

a In the event that the financial backer adds another land speculation with a net present worth of nothing it implies that the new venture is likewise ... View the full answer