Question

Wayne is planning to sell the twenty-room apartment building he bought fifteen years ago, for which he paid $759,000. The real estate market in his area has been falling since that time, and the property has decreased in value by 3.8% every year. Wayne rents each of his apartments for $495 per month, and upkeep on the building costs him $26,400 annually. Assuming that Wayne has kept his apartment complex constantly three-quarters full, what will his net profit or loss be when he sells the building, to the nearest hundred dollars?
a.
$61,500 loss
b.
$722,400 loss
c.
$168,000 profit
d.
$606,000 profit


Please select the best answer from the choices provided

A
B
C
D

Answer 1

Compute sale price: 759,000*(0.962)^15 ≈ $424,281.

Net rental income per year: 20*0.75*495*12 − 26,400 = 62,700, so over 15 years = 62,700*15 = 940,500.

Total net = sale + rental net − purchase = 424,281 + 940,500 − 759,000 = 605,781 ≈ $606,000 profit.

Answer: D