What is the annual rent per apartment unit

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You are considering constructing a luxury apartment building project that requires an investment of $15,500,000. The building has 50 units. You expect the maintenance cost for the apartment building to be $350,000 the first year and $400,000 the second year, after which it will continue to increase by $50,000 in subsequent years. The cost to hire a manager for the building is estimated to be $85,000 per year. After five years of operation, the apartment building can be sold for $17,000,000.

Problem 1: What is the annual rent per apartment unit that will provide a return on investment of 15% after-tax? Assume that the building will remain fully occupied during the five years.

Reference no: EM132815285

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