D.1. Your client asks you to check on the feasibility of constructing an apartment house with data as follows: current income = $100,000/yr gradient increase in income = $ 10,000/yr/yr current costs = $ 60,000/yr gradient increase in costs = $ 5,000/yr/yr %3D %3D %3! The resale value is expected to equal the current construction costs now, escalating at a rate of 2 percent per year compounded until resale in 10 years. What can he afford to construct the apartments for now if he requires a 20 percent return on investment? (Ans. P = $289,000) %3D

D.1. Your client asks you to check on the feasibility of constructing an apartment house with data as follows: current income = $100,000/yr gradient increase in income = $ 10,000/yr/yr current costs = $ 60,000/yr gradient increase in costs = $ 5,000/yr/yr %3D %3D %3! The resale value is expected to equal the current construction costs now, escalating at a rate of 2 percent per year compounded until resale in 10 years. What can he afford to construct the apartments for now if he requires a 20 percent return on investment? (Ans. P = $289,000) %3D

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter5: Investment Decisions: Look Ahead And Reason Back

Section: Chapter Questions

Problem 5.4IP

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