A Property Produces a First-Year Net Operating Income of $24,000

question 13

Multiple Choice

A property produces a first-year net operating income of $24,000.Because of the long economic life of the building,the income is considered as a perpetuity that will grow by 2.5% per year.Using a discount rate of 9.5%,the property value is estimated at:

• A)$276,968
• B)$252,632
• C)$200,000
• D)$342,857

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Definitions:

Income Effect

The change in an individual's or economy's income and how that change will impact the quantity demanded of a good or service.

Inferior Good

A good, such as used clothes, for which demand decreases, or shifts leftward, as consumer income rises.

Potatoes

A starchy tuber vegetable grown and consumed worldwide, serving as a staple food in many cultures.

Demand Curve

A graphical representation of the relationship between the price of a good and the quantity demanded by consumers.