Sky High Partners is evaluating a high-rise office building to add to its investment portfolio. To calculate a value, Sky High plans to use the income approach, based on the following estimates:

a. Compute the net operating income (NOI) for the building.

b. Using the income approach, calculate the value for the office building.

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Gross potential yearly rental income Estimated vacancy rate Yearly operating costs Market capitalization rate $894,000 3.5% $426,000 16%