Find sensitivity of annual profit changes in occupancny rate

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Reference no: EM131507028

Question: A group of private investors borrowed $30 million to build 300 new luxury apartments near a large university. The money was borrowed at 6% annual interest, and the loan is to be repaid in equal annual amounts over a 40-year period. Annual operating, maintenance, and insurance expenses are estimated to be $4,000 per apartment. This expense will be incurred even if an apartment is vacant. The rental fee for each apartment will be $12,000 per year, and the worst-case occupancy rate is projected to be 80%. Investigate the sensitivity of annual profit (or loss) to

(a) changes in the occupancy rate and

(b) changes in the annual rental fee.

Reference no: EM131507028

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