Jim Corporation, an investment company, is considering building a 50-unit apartment complex in a growing area...

 

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Jim Corporation, an investment company, is considering building a 50-unit apartment complex in a growing area near Tucson, Arizona. Due to the town's promising prospects for long-term development, it is anticipated that the company could maintain an average annual occupancy rate of 85% for the entire complex. Considering the provided financial data as reasonably accurate estimates, ascertain the minimum monthly rent that should be set if a desired rate of return of 15% is to be achieved. Land investment cost-$1,000,000 Building investment cost = $2,500,000 Annual upkeep cost = $100,000 Property taxes and insurance-5% of total initial investment Study period -25 years Salvage value = only land cost can be recovered in full. . . Jim Corporation, an investment company, is considering building a 50-unit apartment complex in a growing area near Tucson, Arizona. Due to the town's promising prospects for long-term development, it is anticipated that the company could maintain an average annual occupancy rate of 85% for the entire complex. Considering the provided financial data as reasonably accurate estimates, ascertain the minimum monthly rent that should be set if a desired rate of return of 15% is to be achieved. Land investment cost-$1,000,000 Building investment cost = $2,500,000 Annual upkeep cost = $100,000 Property taxes and insurance-5% of total initial investment Study period -25 years Salvage value = only land cost can be recovered in full. . .

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To determine the minimum monthly rent that should be set in order to achieve a desired rate of return of 15 we need to calculate the annual cash inflo... View the full answer