Question

Five years ago, William bought a twelve-room apartment complex for $340,000, and he plans to sell it today. The real estate market caused William’s complex to increase in value by 1.8% every year. William charges $525 per month to rent a room, and pays $36,500 in building upkeep every year. If William has kept all of his apartments continually rented out since he bought the building, to the nearest hundred dollars, how much profit will he realize once he sells it?

Answer 1

Answer

= $227200

Explanation

William bought the apartment for $340,000

The cost of the apartment after 5 years = 340,000(1+0.018)⁵

= 340,000 × 1.0.18⁵

= $371,721.60

The money he raised from rentals = 525 × 12 × 5 × 12

= $378,000

His expenditure (tomentain the apartment) = $ 36,500 × 5

= $182500

Profit after selling the apartment will be:

Profit = ($371,721.60 + $378,000) - ($182,500 + $340,000)

= $749,722 - 522500

= $227222

To the nearest hundred dollar = $227200

Answer 2

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this can be solved by using the formula

F = P(1 + i)^n

Where F is the future worth of the money

P is the present worth of the money

I is the fraction increase

N is the number of years

So P = 340000

F = 340,000(1+0.018)^5

F = $371,722

Profit = $371,722- 340000 +$525(5)(12)(12) -36,500(5)

Profit =  $ 227,200