Investment value differences across investors?

• A. Market value and investment value are always equal.
• B. Replacement cost controls investment value.
• C. Investment value is determined by the landlord's equity stake.
• D. Investment value varies with each investor's cash flows and risk preferences.

Answer: (D)

Investment value is the value to a specific investor, based on the cash flows they expect from the property and the return they require given its risk. Because investors differ in financing terms, tax situations, risk tolerance, and investment horizons, they apply different discount rates to the same cash flows. A higher required return reduces value, a lower one increases it. So the same property can have different investment values for different people, reflecting each investor’s cash flows and risk preferences. This is why the statement that investment value varies with each investor's cash flows and risk preferences is the best fit. Market value, replacement cost, and the landlord’s equity stake are not universal determinants of investment value for every investor.