An investor relies on debt to finance the investment of a commercial real estate project. Given different choices of the leverage, the investor calculates the equity dividend rates assuming a 3% rent growth rate and the internal rate of returns in three scenarios of the annual rent growth within the expected holding period of the investment. Which of the following statement is FALSE the single-year or multi-year return measures? LTV 0% 60% 80% 90% Equity Dividend Rate (EDR) 8.6% 9.2% 10.1% 11.2% Annual rent growth (next 5 IRR years) -1% (prob. 10%) 6.2% 4.1% 1.2% -2.5% 3% (prob. 80%) 10.2% 12.4% 15.7% 18.2% 7% (prob. 10%) 12.5% 16.3% 20.1% 34.8% Mean IRR 10.0% 12.0% 14.7% 17.8% If we know with certainty that rent growth is -1%, no borrowing is the optimal choice EDR is increasing in LTV, because the cost of external fund is smaller than the cost of internal fund IRR under-1% rent growth is decreasing in LTV, because the cost of debt finance is larger than the cost of equity finance The mean IRR is increasing in LTV, because the cost of debt finance is larger than the cost of equity finance