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If the capitalization rate on a building that produces a $20,000 annual income is 10 percent, what is the estimated value of the building?

Respuesta :

Answer:

Value of building = $200,000

Explanation:

Provided capitalization rate = 10%

Annual income = $20,000

Estimated value of asset = [tex]\frac{Annual\ Income}{Capitalization\ Rate}[/tex]

Since, all the information related to variables used in calculating value are provided we can compute the value of building.

Value of building = [tex]\frac{20,000}{0.10}[/tex] = $200,000

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