How much would be willing to pay for the building today

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Problem 1: A building is appraised at $1 million. This estimate is based on forecasted net rent of $100,000 per year discounted at a 10 percent 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) $681,818

B) $750,000

C) $909,090

D) $1,000,000

Reference no: EM132791363

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