Question

Given the following information, calculate the effective gross income multiplier: sale price: $950,000; potential gross income: $250,000; vacancy and collection losses: 15%; and miscellaneous income: $50,000.
A. 0.36
B. 0.30
C. 2.8
D. 3.6

Answer 1

Answer:

D. 3.6

Explanation:

The effective gross income multiplier (EGIM) is the ratio between the sale price (SP) and the effective growth income (EGI)

$EGIM = \frac{SP}{EGI}$

Sales Price (SP) = $950,000

Potential gross income (PI) = $250,000

Vacancy and collection losses (VC)= 15% = 0.15 * $250,000 = $37,500

Miscellaneous income (M) =  $50,000.

The effective growth income is given by:

$EGI = PI +M - VC = \ 250,000 +\ 50,000 - \ 37,500\\EGI = \ 262,500$

Thus, the effective gross income multiplier is:

$EGIM = \frac{\ 950,000}{\ 262,500} \\EGIM = 3.6$