The net profit of Wayne be when he sells the building is $606000 and this can be determined by using the formula of profit.
Given :
- Wayne is planning to sell the twenty-room apartment building he bought fifteen years ago, for which he paid $759,000.
- The real estate market in his area has been falling since that time, and the property has decreased in value by 3.89% every year.
- Wayne rents each of his apartments for $495 per month, and upkeep on the building costs him $26,400 annually.
- Assume that Wayne has kept his apartment complex constantly three-quarters full.
First, determine the annual revenue which is given by:
Annual Revenue = Monthly Rent [tex]\times[/tex] Number of Rooms [tex]\times[/tex] Number of months [tex]\times[/tex] Three-quarters
Annual Revenue = 495 [tex]\times[/tex] 20 [tex]\times[/tex] 12 [tex]\times[/tex] (3/4) = $89100
Total Profit = (Annual Revenue - Annual Cost) [tex]\times[/tex] (Number of years)
= (89100 - 26400) [tex]\times[/tex] 15
= $940500
Now, the net profit of Wayne when he sells the building is given by:
Net Profit = Value of the building at the end of the 15th year + Total profit from renting - Cost of the building
Net Profit = 424490.38 + 940500 - 759000 = 605990.38
Net Profit [tex]\approx[/tex] $606000
Therefore, the correct option is D).
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