Land value: 

135 125

Required return on land: 

8% per annum

Expected life of building: 

20 years

Required return from building: 

12% per annum

Replacement of capital: 

8% per annum

Net annual income: 

25 000

METHOD

Net annual income: 

25 000

Less return from land: Land value = 8 % * 135 125 = 

(10 810)

Income from building = 

14 190

Required return from building: 
0.1200 + Sinking fund factor: 0.0219 = 0.1419 (ie 14.19% pa)

BUILDING VALUE

Value of building: 14190 * 100/14.19 =