On land worth P800,000 an investor constructs a building worth P3,000,000 containing a theater , a bank, stores and offices. The owner estimates that the annual receipts from rentals will be P720,000, and annual expenses to cover taxes, insurance and maintenance of the building will be P80,000. He also estimates that the land can be sold for P1,200,000, the building for P2,000,000 at the end of 20 years. If his money is now earning 15% before taxes, what is the rate of return to justify this investment?
On land worth P800,000 an investor constructs a building worth P3,000,000 containing a theater , a bank, stores and offices. The owner estimates that the annual receipts from rentals will be P720,000, and annual expenses to cover taxes, insurance and maintenance of the building will be P80,000. He also estimates that the land can be sold for P1,200,000, the building for P2,000,000 at the end of 20 years. If his money is now earning 15% before taxes, what is the rate of return to justify this investment?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
![On land worth P800,000 an investor constructs a
building worth P3,000,000 containing a theater,
a bank, stores and offices. The owner estimates
that the annual receipts from rentals will be
P720,000, and annual expenses to cover taxes,
insurance and maintenance of the building will
be P80,000. He also estimates that the land can
be sold for P1,200,000, the building for
P2,000,000 at the end of 20 years. If his money
is now earning 15% before taxes, what is the
rate of return to justify this investment?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1d02ad34-3d40-498e-9eef-b6e8f2ba88ed%2F452eabcc-0617-4453-bda5-b5960fb68ce8%2Fq6fpqdp_processed.jpeg&w=3840&q=75)
Transcribed Image Text:On land worth P800,000 an investor constructs a
building worth P3,000,000 containing a theater,
a bank, stores and offices. The owner estimates
that the annual receipts from rentals will be
P720,000, and annual expenses to cover taxes,
insurance and maintenance of the building will
be P80,000. He also estimates that the land can
be sold for P1,200,000, the building for
P2,000,000 at the end of 20 years. If his money
is now earning 15% before taxes, what is the
rate of return to justify this investment?
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![FINANCIAL ACCOUNTING](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781259964947/9781259964947_smallCoverImage.jpg)
![Accounting](https://www.bartleby.com/isbn_cover_images/9781337272094/9781337272094_smallCoverImage.gif)
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
![Accounting Information Systems](https://www.bartleby.com/isbn_cover_images/9781337619202/9781337619202_smallCoverImage.gif)
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
![Horngren's Cost Accounting: A Managerial Emphasis…](https://www.bartleby.com/isbn_cover_images/9780134475585/9780134475585_smallCoverImage.gif)
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
![Intermediate Accounting](https://www.bartleby.com/isbn_cover_images/9781259722660/9781259722660_smallCoverImage.gif)
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
![Financial and Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781259726705/9781259726705_smallCoverImage.gif)
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education