Gross rents operating expenses and real estate taxes are uncertain but are expec

Gross rents operating expenses and real estate taxes are uncertain but are expected to grow with inflation.?c However it would take one year and $200000 to clear out the railroad equipment and prepare the building for use as a warehouse. This expenditure would be spread evenly over the next year.?c The property will be put on the market when ready for use as a warehouse. Your real estate adviser says that properties of this type take on average 1 year to sell after they are put on the market. However the railroad could rent the building as a warehouse while waiting for it to sell.?c The opportunity cost of capital for investment in real estate is 8 percent in real terms.?c Your real estate adviser notes that selling prices of comparable buildings in northernNew Jersey have declined in real terms at an average rate of 2 percent per year over the last 10 years.?c A 5 percent sales commission would be paid by the railroad at the time of the sale.?c The railroad pays no income taxes. It would have to pay propertytaxes.