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You have inherited a run-down house in Chicago. There is an active market in properties of this type, and similar properties are selling for $100,000.

You have inherited a run-down house in Chicago. There is an active market in properties of this type, and similar properties are selling for $100,000. If rented out, the cash returns are expected to be $12,000 per year forever. If the appropriate discount rate is 15%, how much is the house worth?

a. $180,000

b. $80,000

c. $100,000

d. $260,000

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