Inferior Lease Position [2919]

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Jack has rented his land to The Land Development Corporation for 15 years.  His rental income is $12,000 per year.  The market rate for similar tracts is $20,000 annually.  What is the adjustment required because of the inferior lease position?  What is the value of the leasehold estate?  Assume a discount rate of 8%.

 

Column

Rate

Years

Amount

Factor

Value

5

8.0%

15

$8,000

8.559479

$68,476


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