Question

ENGINEERING ECONOMY

A businessman is considering building a 25 unit apartment in a place near a progressive commercial center. He felt that because of the location of the apartment , it will be occupied 90% at all time. He desires a rate of return of 20%. Other pertinent data are the following.

Land investment……………………P5,000,000

Building investment……………….P7,000,000

Study period…………………………20 years

Cost of land after 20 years……….P20,000,000

Cost of building after 20 years…..P2,000,000

Rent per unit per year…………….P6,000

Upkeep per unit per year…………P500

Property taxes……………………….1%

Insurance…………………………….0.50%

Is this a good investment?

Answer 1

As we can se from the above table, the ROR is less than the desired rate of return of 20% ,

Hence, It is not a good investment.

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