Jake's Comparative Market Analysis on a Vacant Office Building

What should Jake recommend as a selling price for the vacant office building?

Jake should recommend a selling price of approximately $757,375 for the vacant office building.

To determine the recommended selling price for the vacant office building, Jake needs to consider several factors:
1. First, Jake should calculate the current market value of the office building by multiplying the square footage (10,000 square feet) by the market value per square foot ($100). This calculation will give him the building's current value.
Calculation: 10,000 square feet * $100 per square foot

= $1,000,000
2. Next, Jake should account for the depreciation of the building over the past 5 years. The owner has agreed that the building experiences a yearly 3% depreciation. To calculate the cumulative depreciation over 5 years, Jake can use the compound interest formula:
Calculation: $1,000,000 * (1 - 0.03)^5
By plugging this into a calculator, we find that the building's value has depreciated to approximately $857,375.
3. Finally, Jake should compare the value of the vacant lot next door, which sold for $100,000, to the value of the building after accounting for depreciation. Since the vacant lot does not have a building on it, Jake should subtract the value of the vacant lot from the depreciated value of the building to determine the recommended selling price.

Calculation: $857,375 - $100,000 = $757,375
Therefore, Jake should recommend a selling price of approximately $757,375 for the vacant office building.