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How does leverage affect the equity investor

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Question: a. How does leverage affect the equity investor's ex ante risk-adjusted return, or the expected risk premium per unit of risk, assuming the property is bought at fair market value and the debt is unsubsidized?

b. How does leverage affect the NPV of the equity investor's investment if the property is bought at a price different from its fair market value, assuming the loan is at the market interest rate and the investor has unlimited equity capital available to invest?

Reference no: EM131734438

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