Answer:
Cost of land = $1,005,000
Cost of building = $4,275,000
Explanation:
The calculation of cost of the land and new building is shown below:-
Cost of land = Purchase cost + Demolition of old building + Legal fees for title investigation and purchase contract - Salvaged materials
= $960,000 + $ 60,000 + 15,000 - $30,000
= $1,005,000
Cost of building = Architects Fees + Construction costs
= $105,000 + $4,170,000
= $4,275,000
A. Is correct. Technically it could be B. and C. But I think A. is the answer that it is looking for! Wait to get a second opinion before answering though.
Answer:
<u>C. capitalization rate.</u>
Explanation:
- The cap rate is the rate that the developer of the real estate would measure the valuation of the different real estate investments. It is often calculated as the ratio between the net operating income that is produced by an asset and the original capital cost.
- Alternatively, it's the current market value. however, the investor must take the opportunity cost into account. The cap rate is based on Net Operating Income.
- The caps can be only recognized by the cash flow of real estate investment and not the change in the value of the property. For example, a property is delivered at an 8% capitalization or its increases by 2% delivering at 10% of the overall rate of return.
- The realized rates of return are depended upon the amount of the borrowed funds, and leverage, that is used to purchase an asset.