Ask Question
21 March, 08:15

An apartment building has potential annual rents of $80,000. Expenses are $26,000. The current vacancy rate is 6%. The owner has a rate of return of 15%. What is the value of the building?

+3
Answers (1)
  1. 21 March, 12:04
    0
    The building is valued at $328,000 for the owner.

    Explanation:

    We calcualte the value of the building using the perpetuity formula:

    C/r = Value

    Where:

    C = annual income generate for the building

    expected rent revenue: revenue x (1 - vacancy)

    80,000 x (1 - 0.06) = 75,200

    expenses per year (26,000)

    income per year: 49,200

    rate of return 15% = 15/100 = 0.15

    C/r = Value

    49,200 / 0.15 = Value = 328,000
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “An apartment building has potential annual rents of $80,000. Expenses are $26,000. The current vacancy rate is 6%. The owner has a rate of ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers