A Building Is Appraised at $1 Million

question 42

Multiple Choice

A building is appraised at $1 million. This estimate is based on a forecast of net rent of
$100,000 per year discounted at 10% [PV = 100,000/ 0.1 = 1,000,000]. The rent is the net of repair and maintenance costs and taxes. Suppose the building is currently in disrepair and it takes one year and $250,000 to bring it into rent able condition. How much would you be willing to pay for the building today?

• A) $1,000,000
• B) $681,818
• C) $750,000
• D) None of the above

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