You have inherited a run-down house in Chicago. There is an active market in properties of this type, and similar properties are selling for $100,000. If rented out, the cash returns are expected to be $12,000 per year forever. If the appropriate discount rate is 15%, how much is the house worth?
A) $80,000
B) $100,000
C) $180,000
D) None of the above
Correct Answer:
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