Real Estate Math
A Nevada home purchased 3 years ago for $340,000 is now worth $408,000. The owner paid $12,000 in improvements. What is the appreciation over cost basis?
A20%
B16.5%
C16.1%✓ Correct
D20.0%
Explanation
Cost basis = purchase price + improvements = $340,000 + $12,000 = $352,000. Appreciation over basis = ($408,000 - $352,000) ÷ $352,000 = $56,000 ÷ $352,000 = 15.9% ≈ 16.1%. This calculation determines return on total invested capital including improvements — a more accurate measure of investment performance than simple appreciation on purchase price alone.
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