Real Estate and Capital Structure Decisions–Lease-Versus-Buy Analysis Harvard Case Solution & Analysis

Provides real estate market data for analysis office rent or buy decision. Demonstration of what is known as "leasing puzzle" - the answer is simple in that the two forms of funding should not be an equivalent in the presence of imperfections in the capital market, although both are forms of credit. Examines asset specificity arguments that, as a rule, companies should not own posts if this is dictated by its core business. Presents two contrasting anecdotes to illustrate why traders should not take the opportunity to make a buoyant property market. The argument is that shareholders do not want retailers to invest in property for them, because they can do so through their own activities portfolio. Also addresses issues such as the rights of shareholders and the accounting and tax implications. The analysis provides ample material for discussion. "Hide
by Frederik Pretorius, Maria Ho Source: University of Hong Kong, 12 pages. Publication Date: February 10, 2003. Prod. #: HKU253-PDF-ENG

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