$\begin{array}{lrr}
Units&275&300\\
\text { Gross Revenue } & \$ 3,267,000 & \$ 3,564,000 \
\text { Vacancy } & 163,350 & 178,200 \
\text { Expenses } & \underline{1,143,450} & \underline{1,247,400} \
\text { Net Operating Income } & \$ 1,960,200 & \$ 2,138,400\\
\end{array}$
Cost$~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ \$ 22,000,000 \quad \$ 22,800,000 $
-Consider the table above. An investor-developer demands a return of at least 9 percent on cost. Which of the following statements is TRUE based on the information above?
A) Neither project produces a sufficient expected return
B) The 275 unit project produces a sufficient return, but the 300 unit project does not
C) The 300 unit project produces a sufficient return, but the 275 unit project does not
D) Both projects produce sufficient return, but the 275 unit project produces a higher return than the 300 unit project

Question

$\begin{array}{lrr}
Units&275&300\\
\text { Gross Revenue } & \$ 3,267,000 & \$ 3,564,000 \
\text { Vacancy } & 163,350 & 178,200 \
\text { Expenses } & \underline{1,143,450} & \underline{1,247,400} \
 \text { Net Operating Income } & \$ 1,960,200 & \$ 2,138,400\\
\end{array}$
Cost$~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ \$ 22,000,000 \quad \$ 22,800,000 $
-Consider the table above. An investor-developer demands a return of at least 9 percent on cost. Which of the following statements is TRUE based on the information above?
A) Neither project produces a sufficient expected return
B) The 275 unit project produces a sufficient return, but the 300 unit project does not
C) The 300 unit project produces a sufficient return, but the 275 unit project does not
D) Both projects produce sufficient return, but the 275 unit project produces a higher return than the 300 unit project

Quizplus · Accepted Answer

The 300 unit project produces a sufficient return, but the 275 unit project does not.The 300 unit project has a net operating income of $2,138,400. The cost of the project is $22,800,000. The return on cost is $2,138,400 / $22,800,000 = 9.38%. This is greater than the required return of 9%.The 275 unit project has a net operating income of $1,960,200. The cost of the project is $22,000,000. The return on cost is $1,960,200 / $22,000,000 = 8.91%. This is less than the required return of 9%.

Cost $22,000,000$22,800,000~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ \$ 22,000,000 \quad \$ 22,800,000 $22,000,000$22,800,000 -Consider the Table Above

Cost $~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ \$ 22,000,000 \quad \$ 22,800,000$ -Consider the Table Above