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If an office building earns $850,000 per year, and expenses are 35% of that amount and if the property is capitalized at 12%, then the approximate value of that office is $4,604,167.
To solve the above question, we have to first find out the amount spent on expenses which is $850,000 x .35 = $297,500, and then subtract that amount that is the amount spent on expenses from the total amount the office earns which will be, $850,000 - $297,500 = $552,500. Since the property is capitalized at 12% then in order to reach the final answer, take 12% of $552,500, which will be $552,500/12% = $4,604,167 (the approximate value).
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