Which statement correctly distinguishes market vs investment value?

• A. Market value is the price a property would fetch in an open market, and investment value is the same price to a specific investor.
• B. Market value is influenced by a specific investor's cash flows; investment value ignores risk.
• C. Market value is the price in an open market; investment value depends on an individual investor's cash flows and risk.
• D. Market value equals replacement cost.

Answer: (C)

Market value is the price a property would bring in an open market, reflecting broad buyer demand and market conditions. Investment value, on the other hand, is the value to a specific investor based on that investor’s own expected cash flows, financing, taxes, and risk preferences. Because market value reflects the general market and is not tailored to any one buyer, it can differ from what a particular investor requires or is willing to pay. An investor’s calculated value depends on their unique cash-flow expectations and the level of risk they’re willing to accept, which can push investment value above or below the market price. Replacement cost is a separate concept, representing what it would cost to reproduce or replace the property, not what the market would pay or what an individual investor would value.