Question

Given the following information, calculate the net operating income assuming below-line treatment of capital expenditures: property: 6 office units, contract rents per unit: $2,750 per month; vacancy and collection losses: 19%; operating expenses: $45,500; capital expenditures: 7%.

Answer 1

$114,880

Step-by-step explanation:

The computation of the net operating income is shown below:

= (Number of office units × contract rents per unit × total number of months in a year) - (Number of office units × contract rents per unit × total number of months in a year × vacancy and collection losses - operating expenses)

= (6 × $2,750 × 12 months) - (6 × 2,750 × 12 months × 19% - $45,500)

= $198,000 - $37,620 - $45,500

= $114,880

We simply applied the above formula