Question

The net income on a parcel of income-producing units was $32,000 for the last year. This represented an 8% return on the market value of the property. The property changed so as to cause the owners to want a 10% return on their investment. In view of this increased percentage rate of return, how much would the property be worth?

Answer 1

The answer is: $320,000

Step-by-step explanation:

To determine the value of income producing assets using the return rate as the valuation parameter, we use the following formula:

asset value = (100% / return rate) x income produced

asset value = (100% / 10%) x $32,000 = 10 x $32,000

asset value = $320,000