1. Two years ago Sam purchased a duplex for $180,000 cash. She has rented out one side for $1,000 a month.

Taxes have been $1,800 every six months. Sam put in new carpeting throughout the duplex and gave it a fresh coat of paint when she purchased it; these improvements cost about $5,000. She now is considering selling the duplex and moving into a single-family home. (LO 15-1)

a. At what price should Sam sell the duplex to earn a ROI of 10%?

b. If she goes through a realtor to sell the property, Sam will have to pay a commission of 6% of the selling price. To maintain a ROI of 10% and accommodate the expense of the realtor’s fee, what should her asking price be?

c. Sam is offered $225,000 for the duplex. After paying the 6% realtor’s commission, what is her actual ROI?