Debt financing has neutral effect on the equity cash yield

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An investor is considering the purchase of a property for $1 million. Based on the $1 million price, the property has a cap rate of 10.5%. The investor can obtain an interest-only mortgage loan at 8.0%. Suppose the investor borrows 75% of the price to acquire the property. What is the maximum price the investor could pay for the property before debt financing has a neutral effect on the equity cash yield?

Reference no: EM131868162

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