A warehouse building was purchased 10 years ago for $250,000.Since then, the eff

Question

A warehouse building was purchased 10 years ago for $250,000.Since then, the effective annual interest rate has been 8%,inflation has been steady at 2.5%, and the building has had nodeterioration or decrease in utility. What should the warehousesell for today? a. $427,000   b. $540,000   c.$678,000   d. $691,000 A warehouse building was purchased 10 years ago for $250,000.Since then, the effective annual interest rate has been 8%,inflation has been steady at 2.5%, and the building has had nodeterioration or decrease in utility. What should the warehousesell for today? a. $427,000   b. $540,000   c.$678,000   d. $691,000

Explanation / Answer

d. $691,000 d= f +i(1+f) =0.025 + 0.08*(1+0.025) =0.107 F = 250000 * (1.107)10=690902 ˜ 691000

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