1.You have been asked to estimate the market value of an office building with the following characteristics:

Leasable space:40,000 square feet

Average rent:$20 per square foot per year

Expected annual rent increase:3% per year

Misc. income$5 per square foot per year

Expect annual misc. income growth:5% per year

Vacancy and collection losses:15% of potential gross income

Operating expenses:20% of effective gross income

Capital expenditures:25% of effective gross income

Going-in cap rate:7.5%

Going-out cap rate:10%

Discount rate:8.5%

Selling expenses:10% of selling price

1.What is the market value of the apartment building according the direct capitalization approach to income valuation?

a.$7.72million

b.$8.29million

c.$9.39 million

d.$14.17 million

e.None of the above