A Building Is Appraised at $1 Million

question 60

Multiple Choice

A building is appraised at $1 million.This estimate is based on forecasted net rent of $100,000 per year discounted at a 10% cost of capital [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 uninhabitable.It will take one year and $250,000 of work (spent at the end of the year) to bring it into rentable condition.How much would you be willing to pay for the building today?

• A)$1,000,000
• B)$681,818
• C)$750,000
• D)$909,090

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Definitions:

Family Educational Rights and Privacy Act

A federal law in the United States that aims to protect the privacy of student education records, giving parents specific rights with respect to their children's education records until the age of 18, when these rights transfer to the students.

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Circumstantiality

A communication disorder where the individual includes unnecessary detail and struggles to get to the point, often seen in cognitive disorders or neurological conditions.

Delusions

False beliefs that are strongly held in spite of invalidating evidence, often symptomatic of psychiatric disorders such as schizophrenia.