Which statement correctly contrasts market value with investment value?

• A. Market value is the price in an open market; investment value is the same price to a specific investor.
• B. Market value is influenced by tax assessments.
• C. Investment value is based on market rents.
• D. Market value is the price in an open market, while investment value depends on a specific investor's cash flows and risk.

Answer: (D)

Two ideas drive this distinction: market value reflects what buyers in a competitive, open market are willing to pay, while investment value reflects what a specific investor would be willing to pay based on that investor’s own cash flows and risk.

That’s why the statement pairing market value with the open-market price and investment value with the investor’s unique cash flows and risk is the best fit. Different investors can see the same property as more or less valuable depending on their financing, tax situation, expected rents, costs, and required return, so investment value can diverge from the market price.

Other ideas miss parts of this picture. Tax assessments can influence assessed values but don’t define market value. Investment value isn’t determined solely by market rents; it depends on all relevant cash flows and risk for the particular investor. And market value and investment value aren’t always the same price, since one is market-driven and the other investor-specific.