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A building is appraised at $1 million. This estimate is based on a forecast of net rent of $80,000 per year discounted at 8% [PV = 80,000/0.08= 1,000,000]. The rent is the net of repair and maintenance costs and taxes. Suppose the building is currently in disrepair and it takes one year and $200,000 to bring it into rentable condition. How much would you be willing to pay for the building today?
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