Posted by JT-IN on June 07, 2009 at 18:17:55:
In Reply to: RE Licence Textbook is WRONG, I'M RIGHT! posted by investorapprentice on June 07, 2009 at 08:34:23:
With the possible choices they list, the books answer must be D) 140,000. Although in reality if this had occured and the value depreciated at an even 5% for 7 straight years the true value would have been appx 130,400 7 yrs ago.
To do this long hand, so you can see the result annually take the 130,400 and multiply it by .95... then take that answer (product) times .95, and so on 7 times. You end up just less than 91,000 after devaluing by 5% each year.
What the book asks is based on a total loss of 35% of the original value, or 140,000 times .65% = 91,000. Not real world.
So the moral of the story is... answer D on the test. After you pass, listen to your friend, as he knows at least his math, if not much more. Any by all means, don't ask this group of RE investors ANY simple questions because they aren't used to simple questions. They deal with chinese arithmetic type RE problems everyday; hence the immediate conversion to tax law and depreciation. LOL
Good luck on the test.