If a comparable property sold for $40,000 two years ago with a 7% annual time adjustment, what is the time adjustment value?

To determine the time adjustment value for a comparable property sold for $40,000 two years ago with a 7% annual time adjustment, we need to calculate the increase in value due to the time adjustment over the two-year period.

The formula for calculating the future value of an amount considering a certain percentage increase over multiple periods is:

Future Value = Present Value × (1 + Rate) ^ Number of Years

In this case, the present value is $40,000, the rate is 7% (or 0.07), and the number of years is 2.

Applying this formula:

Future Value = $40,000 × (1 + 0.07) ^ 2

Future Value = $40,000 × (1.07)^2

Future Value = $40,000 × 1.1449 (approximately)

Future Value = $45,796

Now, to find the time adjustment value, we subtract the original sale price from the future value:

Time Adjustment Value = Future Value - Original Sale Price

Time Adjustment Value = $45,796 - $40,000

Time Adjustment Value = $5,796

This calculation shows that the time adjustment value, reflecting the increase in value