Question

Rosalyn is planning to sell her apartment complex. Ten years ago, she bought the eight-room complex for $420,000. The building has gained 2.2% in value every year since she bought it. She charges a monthly rent of $720 for each room, and pays $22,900 per year in upkeep costs. If Rosalyn has kept all of the rooms occupied continuously since she bought it, to the nearest hundred dollars, how much profit will she have made in total when she sells it?
a.
$770,400
b.
$554,600
c.
$564,300
d.
$492,300

Answer 1

Sale price = 420,000*(1.022)^10 ≈ 420,000*1.24310776 ≈ $522,105.
Appreciation gain = 522,105 − 420,000 = $102,105.

Annual rent = 720*12*8 = $69,120.
Annual net income = 69,120 − 22,900 = $46,220.
Net income over 10 years = 46,220*10 = $462,200.

Total profit = 102,105 + 462,200 = $564,305 ≈ $564,300.

Answer: c. $564,300.