You are considering a luxury apartment building project that requires an investment of $15,000,000. The building has 50 units. You expect the maintenance cost for the apartment building to be $300,000 the first year and $320,000 the second year. The maintenance cost will continue to increase by $20,000 in subsequent years. The cost to hire a manager for the building is estimated to be $70,000 per year. After five years of operation, the apartment building can be sold for $20,000,000. What is the annual rent per apartment unit that will provide a return on investment of 15% ? Assume that the building will remain fully occupied during its five years of operation and rent remains constant each year. (If you use a computational tool such as Excel please make sure that your reasoning is clearly stated on your solution file) A) $38,257.57 B) $35,628.51 C) $32,712.74 D) Answers A, B and C are not correct

You are considering a luxury apartment building project that requires an investment of $15,000,000. The building has 50 units. You expect the maintenance cost for the apartment building to be $300,000 the first year and $320,000 the second year. The maintenance cost will continue to increase by $20,000 in subsequent years. The cost to hire a manager for the building is estimated to be $70,000 per year. After five years of operation, the apartment building can be sold for $20,000,000. What is the annual rent per apartment unit that will provide a return on investment of 15% ? Assume that the building will remain fully occupied during its five years of operation and rent remains constant each year. (If you use a computational tool such as Excel please make sure that your reasoning is clearly stated on your solution file) A) $38,257.57 B) $35,628.51 C) $32,712.74 D) Answers A, B and C are not correct

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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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

100%

You are considering a luxury apartment building project that requires an
investment of $15,000,000. The building has 50 units. You expect the maintenance cost for the
apartment building to be $300,000 the first year and $320,000 the second year. The maintenance
cost will continue to increase by $20,000 in subsequent years. The cost to hire a manager for the
building is estimated to be $70,000 per year. After five years of operation, the apartment building
can be sold for $20,000,000. What is the annual rent per apartment unit that will provide a return
on investment of 15%? Assume that the building will remain fully occupied during its five years
of operation and rent remains constant each year. (If you use a computational tool such as Excel
please make sure that your reasoning is clearly stated on your solution file)
A) $38,257.57
B) $35,628.51
C) $32,712.74
D) Answers A, B and C are not correct

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