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27 September, 18:26

The potential gross income of a warehouse is $36,000 per year, and the vacancy rate is 2%. The taxes are $2,000 per year; monthly maintenance costs are $300. Quarterly reserves are $450, debt service is $13,500 annually and depreciation is $3,500 annually. If the capitalization rate is 12% what is the estimated value of the warehouse?

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  1. 27 September, 18:34
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    The estimated value of the warehouse is $232,333

    Explanation:

    For computing the estimated value of the warehouse, the following calculations is required which is shown below:

    = Gross income - vacancy rate - yearly maintenance - yearly taxes - yearly reserves : capitalization rate

    where,

    Gross income is $36,000

    Vacancy rate is = $36,000 * 2% = $720

    Yearly maintenance = Monthly maintenance * Number of months in a year

    = $300 * 12

    = $3,600

    Yearly reserves = Quarterly reserves * Number of quarters in a year

    = $450 * 4

    = $1,800

    Yearly taxes = $2,000

    So, the value equal to

    = $36,000 - 720 - $3,600 - $1,800 - $2,000 : 12%

    = $27,880 : 12%

    = $232,333

    The other cost is ignored because it is not related to the computation part.

    Hence, the estimated value of the warehouse is $232,333
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