Abstract

This paper identifies four types of financial leverage on income-producing real property and discusses the relationship of the projected sales price to value. The projected capital gain from either an endogenously or exogenously determined sales price has a significant impact on the size of the discount rate, which is part of the leverage calculation. This paper illustrates the appropriate method to estimate the final sales price, discount rate, and value. A proper technique is critical in determining the real property value, the final business value, and the future profit potential of the asset.