Question

An investment property's return on equity ratio is 15% and the owner has $85,000 of equity.

What is the property cash flow?

a) $10,200 b) $12,750 c) $566,667 d) $708,333

Answer 1

Cash flow will be $12750

So option (B) will be correct answer

Step-by-step explanation:

We have given return on equity = 15 % = 0.15

Total equity = $85000

We have to find the cash flow

Equity is given by

`equity=(cash\ flow)/(return\ on\ equity)`

So
`85000=(cash\ flow)/(0.15)`

`cash\ flow=85000* 0.15=12750`

So cash flow will be equal to $12750

So option (B) will be correct option