A company has following information:::- i) Number of rooms in the apartment = 100 ii) Rent per apartment = $700,000 per month. iii) Operating expenses, including property taxes, insurance, maintenance, and advertising are typically @ 35% of EGI (Effective

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A company has following information:::-
i) Number of rooms in the apartment = 100
ii) Rent per apartment = $700,000 per month.
iii) Operating expenses, including property taxes, insurance, maintenance, and
advertising are typically @ 35% of EGI (Effective Gross Income).
iv) Property management expenses are 15% of EGI.
v) Other incomes generated from parking are expected to be $30,000 per
room per month.
vi) Currently 80 rooms have been rented.
vii) Expected return from the property = 10% p.a.
Compute net operating income and also the value of property.

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