An Important Piece of Criteria for Investors to Consider When

question 7

Multiple Choice

An important piece of criteria for investors to consider when deciding between real estate investment opportunities and investing in stocks or bonds is the effect of income taxes on their return. For most investors, the effective tax rate on commercial real estate is:

• A) greater than the effective tax rate on a stock or bond investment
• B) equal to the effective tax rate on a stock or bond investment
• C) less than the effective tax rate on a stock or bond investment
• D) cannot be compared across asset classes.

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Definitions:

Normal Profit Margin

The average amount by which a company's sales exceed its costs of goods sold and operating expenses, reflecting a typical level of profitability.

Transportation Costs

Expenses incurred by a company to move its products from the place of production to the place of sale.

Floor Constraint

In accounting, a limitation that prevents inventory valuation from falling below a certain point, ensuring that the reported value is not unduly low.

Net Realizable Value

The estimated selling price of goods minus the costs of their sale or disposal, used in accounting to ensure assets are not overstated.