Saturday, June 27, 2009

how is investment value calculated?

the investment value calculation begins where the market value calculations ends. The calculation of market value will have already taken into account the general, or average, investment conditions in the market. to the extent that a particular investors‘s situation is different, the price the investors is willing to pay will differ from market value. for example, investors may vary with respect to their expectations of future rents and vacancies. the amount and cost of equity and debt financing also will generally vary across investors and this may affect how much a particular investors is willing to pay for a particular property. Thus, explicit assumptions about how the acquisitions is to be financed should be included in an investment valuation. finally, expected income tax consequences usually are significant;thus,many investors choose to incorporate future income tax consequences into their analysis of a proposed investment.

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