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A company purchased three buildings. It has assembled the following market data based on commercial real estate sales in the area in the past six
A company purchased three buildings. It has assembled the following market data based on commercial real estate sales in the area in the past six months which can be used to indirectly estimate the selling price of each of the buildings it purchased.
Capitalization Rate | 10,000 sq ft | 20,000 sq ft | 30,000 sq ft | 40,000 sq ft | 50,000 sq ft |
7% | $700,000 | $1,425,000 | $2,000,000 | $2,500,000 | $3,000,000 |
8% | 625,000 | 1,250,000 | 1,750,000 | 2,250,000 | 2,625,000 |
9% | 550,000 | 1,100,000 | 1,550,000 | 2,000,000 | 2,200,000 |
10% | 500,000 | 1,000,000 | 1,400,000 | 1,800,000 | 2,100,000 |
For the three buildings it purchased, the company has measured the size and estimated a capitalization rate based on location and surrounding properties. These estimates for the three buildings are as follows:
Square Feet | Capitalization Rate | |
Building 3 | 38,000 | 7% |
Building 4 | 41,000 | 8% |
Building 5 | 46,000 | 10% |
Estimate the fair value of each of the three buildings.
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