What is the market value of an office building with a potential gross income of $12,600, a vacancy rate of 5%, annual expenses of $3,600, and a capitalization rate of 12%?

To determine the market value of the office building, we first need to calculate the net operating income (NOI) using the provided data—specifically, the potential gross income, vacancy rate, and annual expenses.

1. Calculate the Effective Gross Income (EGI):

The potential gross income is $12,600. Given a vacancy rate of 5%, we can calculate the EGI as follows:

EGI = Potential Gross Income - (Potential Gross Income * Vacancy Rate)

EGI = $12,600 - ($12,600 * 0.05)

EGI = $12,600 - $630

EGI = $11,970

2. Calculate the Net Operating Income (NOI):

Now, we subtract the annual expenses from the EGI. The annual expenses are $3,600, so:

NOI = EGI - Annual Expenses

NOI = $11,970 - $3,600

NOI = $8,370

3. Calculate the Market Value using the Capitalization Rate:

The capitalization rate is given as 12% (or 0.12). The formula for calculating