Valdez Corporation, a calendar year taxpayer, owns property in States M and O. Both states require that the average value of assets be included in the property factor. State M requires that the property be valued at its historical cost, and State O requires that the property be included in the property factor at its net depreciated book value.

	Account Balances at Beginning of Year
	State M	State O	Totals
Inventories	$ 200,000	$300,000	$ 500,000
Building & machinery (cost)	700,000	300,000	1,000,000
Accumulated depreciation	(150,000)	(50,000)	(200,000)
Land	400,000	200,000	600,000
Totals	$1,150,000	$750,000	$1,900,000

	Account Balances at Year-End
	State M	State O	Totals
Inventories	$ 400,000	$ 100,000	$ 500,000
Building & machinery (cost)	800,000	500,000	1,300,000
Accumulated depreciation	(300,000)	(100,000)	(400,000)
Land	400,000	200,000	600,000
Totals	$1,300,000	$ 700,000	$2,000,000

Valdez's O property factor is:

a. 37.2%.

b. 39.5%.

c. 53.8%.

d. 35.0%.