On the assumption that the tenant will exercise her purchase option, what is the present value of the reversion?

The present value of the reversion is calculated based on the anticipated cash flow from the property at the end of the lease term, after considering the option the tenant has to purchase the property. If the assumption is that the tenant will indeed exercise her purchase option, then the value of the reversion effectively diminishes because the property will no longer be available for lease or generate rental income beyond that point.

If the present value of the reversion is less than $10,000, this suggests a situation where either the anticipated cash flow from the property is minimal, or the underlying property itself may have significantly lower market value, thus resulting in a low present value. This can happen in various scenarios, such as a declining real estate market, the property's poor condition, or a lack of demand in the area.

In contrast, the higher ranges suggest values that reflect ongoing rental income potential or growth in property value, which would not align with the assumption that the tenant is purchasing the property, thereby removing any ongoing reversionary income. Thus, by correctly identifying the low present value, it indicates that the tenant's purchase option significantly affects the reversion value due to the assured transfer of ownership to the tenant.