QUESTIONS 109 THROUGH 114 RELATE TO ALTERNATIVE INVESTMENTS.

109. An office building with net operating income of $75,000 recently sold for $937,500. Financial

data for a comparable building that is currently on the market for sale is presented in the table

below.

Annual income or expense

Gross potential rental income $300,000

Estimated vacancy and collection losses 4%

Insurance and taxes $27,000

Utilities $14,000

Repairs and maintenance $21,000

Depreciation $15,000

Interest rate on proposed financing 7%

The estimated value for the building being sold using the income approach is closest to?

A. $2,825,000.

B. $2,975,000.

C. $3,228,500.

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