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?

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

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?

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