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1. The purchase of rental property in a neighborhood where real-estate prices are increasing rapidly is being considered. The following estimates have been developed for
1. The purchase of rental property in a neighborhood where real-estate prices are increasing rapidly is being considered. The following estimates have been developed for a preliminary before-tax analysis: $50,000 $6,000 $1,000 First Cost Annual income from rent Annual maintenance Investment period Resale value Cost of capital 6 years $60,000 10% a) Given that the first cost of the property and the investment period are fixed, construct a sensitivity chart showing the effect of changes (up to 50%, at 10% intervals) in all the other elements on the equivalent annual worth individually (i.e., a chart for percent variation on x-axis and AE on y-axis for changes in annual income, and similar charts for changes in resale value, annual maintenance, and cost of capital) b) Construct a sensitivity chart for joint variation within a +30% range (at 10% intervals) of cost of capital and annual income indicate the acceptance and rejection zones on a chart with annual income on the X-axis and the cost of capital on the y-axis (from 10%*1.3=13% to 10%*0.7=7%) 1. The purchase of rental property in a neighborhood where real-estate prices are increasing rapidly is being considered. The following estimates have been developed for a preliminary before-tax analysis: $50,000 $6,000 $1,000 First Cost Annual income from rent Annual maintenance Investment period Resale value Cost of capital 6 years $60,000 10% a) Given that the first cost of the property and the investment period are fixed, construct a sensitivity chart showing the effect of changes (up to 50%, at 10% intervals) in all the other elements on the equivalent annual worth individually (i.e., a chart for percent variation on x-axis and AE on y-axis for changes in annual income, and similar charts for changes in resale value, annual maintenance, and cost of capital) b) Construct a sensitivity chart for joint variation within a +30% range (at 10% intervals) of cost of capital and annual income indicate the acceptance and rejection zones on a chart with annual income on the X-axis and the cost of capital on the y-axis (from 10%*1.3=13% to 10%*0.7=7%)
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