A Property Is Leased for $24,000 Per Year Although Market

question 41

Multiple Choice

A property is leased for $24,000 per year although market rents are currently $27,500 per year and are expected to increase by 2% per year.The property is expected to be sold at the end of year 10 based on a 10% terminal cap rate applied to the eleventh year NOI.The current lease on the property will expire at the end of year 10 so the property can be leased in the eleventh year at market rates.What is the value of the leased fee estate based on an 11.5% discount rate?

• A)$362,489
• B)$298,325
• C)$251,298
• D)$271,486

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Definitions:

Naturally Analytical

Having an innate ability or tendency to assess things methodically and logically.

Snap Judgments

Quick decisions or assessments made instinctively without thorough analysis.

Cognitive Dissonance Theory

The theory that suggests that people experience discomfort or distress when their beliefs, attitudes, or behaviors are inconsistent with each other, leading to efforts to reduce the dissonance.

Attribution Theory

A theory focused on how people interpret and understand cause and effect relationships, and how this relates to their thinking and behavior.