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San Marcos Realty (SMR) has $4,000,000 available for the purchase of new rental property. After an initial screening, SMR has reduced the investment alternatives to
San Marcos Realty (SMR) has $4,000,000 available for the purchase of new rental property. After an initial screening, SMR has reduced the investment alternatives to townhouses and apartment buildings. Each townhouse can be purchased for $385,000, and four are available. Each apartment building can be purchased for $250,000 (down payment), and the developer will construct as many buildings as SMR wants to purchase. SMR's property manager can devote up to 180 hours per month to these new properties; each townhouse is expected to require 7 hour per month, and each apartment building is expected to require 35 hours per month in management attention. The annual cash flow, after deducting mortgage payments and operating expenses, is estimated to be $12,000 per townhouse and $17,000 per apartment building. SMR's owner would like to determine the number (integer) of townhouses and the number of apartment buildings to purchase to maximize annual cash flow
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