A residential building fetches a monthly gross rent of Rs. 12,000. The annual outgoings in the form of taxes and other contingencies is Rs. 12,000. The cost of land comes to Rs. 6,00,000. Estimate the total value of property (in Rs.) on a yearly basis. Assume the rate of interest as 6% per annum.
7,32,550
28,00,440
29,88,000
22,00,380
28,00,440
The Capitalized value of a property is given as:
Capitalized value = Net Income × Year's Purchase
Where,
Net Income = Gross Income - All outgoings or expenses
Year's Purchase = 100/(Interest rate in %)
The total value of the property on yearly basis is the sum of land cost and property's capital value
Value of Property = Capitalized Value + Land Cost
Net income = Gross Income – All outgoings or expenses
Net income = 1,44,000 – 12,000 = 1,32,000
Year's Purchase is calculated as: Y.P. = 100/6 = 16.67
Capitalized value = Net Income × Year's Purchase
Capitalized value = 1,32,000 x 16.67 = Rs. 22,00,440/-
Value of Property = Capital Value + Land Cost
Value of Property = Rs. 22,00,440 + Rs. 6,00,000 = Rs. 28,00,440
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