1. Which statement is true ex ante?
A) Leverage normally increases the owner's income return (cash yield) if you pay market value for the property.
B) Leverage normally increases the owner's income return (cash yield) if you pay more than market value for the property.
C) Leverage normally increases the owner's total return (including appreciation) if you pay market value for the property.
D) Leverage normally increases the owner's total return (including appreciation) if you pay more than market value for the property.
2. Why does Maximizing Shareholder value makes sense?
3. Suppose a property has a cap rate of 10% and you can borrow at a mortgage constant of 11%. If you borrow 75% of the property price, what will be your equity yield?
7.00%
8.25%
10.00%
11.00%