A few investors borrowed $25 million to build 600 new apartments near a mall. They borrowed at 10% interest and the loan is to be repaid in equal annual amounts over a 30-year period. Per apartment, maintenance expenses per year are $6,000. The rental fee for each apartment will be $14,000 per year, and the worst-case occupancy rate is projected to be 80%. Please analyze the sensitivity of annual profit (or loss) to (a) changes in the occupancy rate (you can try 60, 65, 70, 75, 80, 85, 90, 95, 100 percent one by one) and (b) changes in the annual rental fee (you can try $10, $12, $14, $16, $18k one by one). Please create a table showing the changes in annual profit.

A few investors borrowed $25 million to build 600 new apartments near a mall. They borrowed at 10% interest and the loan is to be repaid in equal annual amounts over a 30-year period. Per apartment, maintenance expenses per year are $6,000. The rental fee for each apartment will be $14,000 per year, and the worst-case occupancy rate is projected to be 80%. Please analyze the sensitivity of annual profit (or loss) to (a) changes in the occupancy rate (you can try 60, 65, 70, 75, 80, 85, 90, 95, 100 percent one by one) and (b) changes in the annual rental fee (you can try $10, $12, $14, $16, $18k one by one). Please create a table showing the changes in annual profit.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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