Finance: Profitability and Financial Decision-making

Running head: FINANCE
Finance
Name of the Student:
Name of the University:
Authors Note:

1FINANCE
Table of Contents
Introduction:...............................................................................................................................1
Assumption/Case analysis:.........................................................................................................1
Annual income computation:.....................................................................................................2
NPV:...........................................................................................................................................3
Conclusion:................................................................................................................................6
Reference....................................................................................................................................7

2FINANCE
Introduction:
In this report, discussion is made about the profitability and other relevant financial
factors that are required for the financial decision-making. In addition to the financial
sustainability the viability of the products are required to be evaluated for determining the
profitability and the other relevant factors. In the given case, the Small Apartment Complex
at the East Edge of Sam Hughes Neighbourhood Tucson is evaluated.
Assumption/Case analysis:
The project required an investment worth $ 1256309. This is a residential complex
and will be let out on rental basis. The complex holds 2 BHK and 3 BHK rooms of 20 units
and 5 units respectively. The rent per month is $ 935 and $ 1250 respectable for the two-bed
room house and the 3 bed room houses. The annual rental income amounts to $ 299400. In
addition to that, the rental property remains vacant for the 8% on the overall rent out period.
Therefore, the net rental income remains lower than the annual projected rent (Mera and
Renaud 2016). The net rental income for the in the year 1 is ascertained to be $ 275448. In
addition to that, the cost and the rental charges are assumed to be increased by 2% on the
total amounts, this will affect the profitability and the adaptability. With the respective and
reliable income sources, some operating expenses regarded as OPEX and some capital
expenditure (CAPEX) is required to be paid off. The OPEX or the operating expenses consist
of Re Taxes, insurance, interracial expenses exterior expenses, property management cost and
others which re incurred on monthly basis. Further, the reserve fund is made to ascertain to be
99000 per month (Rouanet and Halbert 2016).
The investors of the project are demanding the return for their investment in this
project of 8% on the total investments. The said property is the mixture of the equity and dent
investment. Therefore, the firm needs to pay of an amount out of its profit for the debt
maintenance. in an addition to that the monthly debt maintained cost amounts to be $ 5786