Helpful in assessing the risk of lending to investors for particular projects, which of the
following calculations measures the income-producing ability of the property to meet
operating and financial obligations?
A. Profitability ratios
B. Income multipliers
C. Financial risk ratios
D. Income tax multipliers
Suppose that a property owner plans on spending $15,000 per year over the next 5 years
on maintenance and repairs. However, if she does not spend this amount, she will not be
able to keep rents at market levels, vacancies will increase, and the resale value of the
property in 5 years will be lower. Assume that she would lose about $7,000 a year in net
income and would realize a loss of $85,000 in lower property value at the time of sale if
maintenance is not maintained on the property. Determine the difference between the
present value of the cost of maintaining the property and the loss to the owner if the
property is not maintained assuming
that the owner could earn a 7 percent return on any funds not invested in maintenance
and repairs?
A. The present value of the maintenance costs is $27,802 less than the present value of
the averted loss
B. The present value of the maintenance costs is $27,802 greater than the present value
of the averted loss
C. The present value of the maintenance costs is $32,802 less than the present value of
the averted loss
D. The present value of the maintenance costs is $32,802 greater than the present value
of the averted loss