The Transactional Asset Pricing Approach(TAPA): Incorporation of Leverage and Derivation of Extended Ellwood Formula with Fixed Leverage Benefits

Michaletz Vladimir B. () and Artemenkov Andrey I. ()
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Michaletz Vladimir B.: RF Directorate of State Scientific Research Programs, Russia
Artemenkov Andrey I.: The Westminster International University in Tashkent, WIUT, Uzbekistan, aartemenkov@wiut.uz

Real Estate Management and Valuation, 2021, vol. 29, issue 1, 54-71

Abstract: The Paper discusses the derivation of the Ellwood formula on the basis of the Transactional Asset Pricing approach to valuation (TAPA) and proceeding from the dynamic principle of transactional equity-in-exchange. Discussing the notion of leverage, it introduces a formulation, in capitalized value terms, and measurement, for leverage benefits to a property purchaser. It is found that such a measure for the Ellwood formula is always zero, essentially obviating any-gains-from-trade to the purchasers of property to be had on account of leveraged transactions. To address this weakness in the Ellwood formula, a modified formula is proposed, which accounts for the requirement of positivity of leverage benefits to the purchaser of property.

Keywords: Ellwood formula; Transactional Asset pricing Approach (TAPA); leverage benefits; property valuation; the principle of transactional equity-in exchange (search for similar items in EconPapers)
JEL-codes: D46 G12 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:remava:v:29:y:2021:i:1:p:54-71:n:7

DOI: 10.2478/remav-2021-0006

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