Mr Fury Is Deciding Whether to Purchase an Office Building

question 40

Multiple Choice

Mr. Fury is deciding whether to purchase an office building that he estimates to have operating costs of $750,000 per year, gross potential income of $2,000,000, and a vacancy rate of 10%. A similar property with an NOI of $1,000,000 recently sold for $10,000,000. What is the estimated value of this building?

• A)$750,000
• B)$1,050,000
• C)$2,000,000
• D)$10,500,000
• E)$11,000,000

Recognize the governance and operation structures of corporations, partnerships, and limited liability companies.

Identify the tax implications and liability issues for various business forms.

Understand the creation, operation, and termination of franchises.

Recognize laws and acts governing partnerships, corporations, and limited liability companies.

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Definitions:

Real Risk Free Rate

The rate of return on an investment with no risk of financial loss, after adjusting for inflation.

Inflation Premium

The additional interest rate that lenders charge borrowers to compensate for the loss of purchasing power due to inflation.

Short-Term Bond

A bond that matures in a short period, usually less than five years, making it less sensitive to interest rate changes compared to long-term bonds.

Default Risk Premium

The additional return that investors require to compensate them for the risk of default by the borrower.