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?

Question

Cloe Gallagher

Business

27 June, 22:20

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?

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Answers (1)

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Trystan Burns · Answer 1

The answer is: $320,000

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