Question

An office building has $66,000 of net income and sold for $550,000. What was the rate of return? 12% 8.3% 10% 11.1%

Answer 1

8,3

Step-by-step explanation:

its less then 10%

Answer 2

Option (a), required return is 12%.

Step-by-step explanation:

The required return on the investment can be calculated as under:

Required Return = Net Income on Investment / Market Value of Investment

So here, we have net income of $66,000 and Market Value of the investment is $550,000. By putting values in the above equation, we have:

Required Return = $66,000 / $550,000 = 0.12 = 12%