What is the present value of the rental income?

To determine the present value of rental income, it is essential to consider factors such as the amount of rental income generated, the discount rate, and the duration over which this income is expected. The present value calculation discounts future income to reflect its value today, recognizing that money received in the future is worth less than money received now due to the time value of money concept.

If the choice indicates a range of $150,000 to $175,000, it suggests that the rental income, when appropriately discounted to its present value, falls within that interval after accounting for the relevant variables. This range implies that the projected rental income, over its lifespan or an assumed holding period, is sufficient to yield a present value that justifies an appraisal within this specific bracket.

In professional practice, estimations often rely on historical performance, market trends, and anticipated inflation rates, which collectively help in aligning the appraised value with market conditions. Thus, given the context of investment performance and the time value of money, the present value of the rental income aligning with that range demonstrates a reasonable calculation that reflects a thoughtful appraisal process.