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:

Flexibility

The ability of an individual or organization to adapt to changes, challenges, or new circumstances efficiently and effectively.

Empowerment

Empowerment refers to the process of enabling individuals to take control over their decisions and actions, often leading to increased motivation and a sense of ownership.

Self-determination

The process by which a person controls their own life, particularly in relation to the goals they aspire to achieve, free from external control or influence.

Competence

Refers to the ability of an individual or organization to effectively perform or undertake a specific task, action, or job.