Question 4.

Which of the following is NOT a reasonable argument for using debt financing for property investment?

Options

(a) Debt financing allows equity-constrained investors to invest in real estate.

(b) Debt financing helps real estate investors to diversify their real estate portfolio.

(c) Real estate investment trusts avoid paying corporate income taxes due to interest tax shield.

(d) Businesses that would like to hedge against unexpected increases in inflation can use fixed rate debt financing.

(e) Debt financing can be used as a disciplinary tool to incentivize good management. With leverage, management will be more keen on keeping costs under control and increase revenues.