## Calculating Return on Investment (ROI) for Home Addition### Scenario:Your friend would like to add an addition to their home. Here are the details:- The home was originally purchased for $175,000.- The addition would cost $38,000.- You expect that the addition can improve its value by 4%.### Questions:1. What is the ROI (write as a percentage)?2. Is it a good idea (Yes or No, based on ROI)?### Explanation:To determine whether the home addition is a good investment, we need to calculate the Return on Investment (ROI). Here is the process:1. **Calculate the Expected Increase in Home Value:** - Original home value: $175,000 - Expected increase in value: 4% - Increase in value = $175,000 * 0.04 = $7,0002. **Calculate ROI:** - ROI formula: $(\text{Gain from Investment} - \text{Cost of Investment}) / \text{Cost of Investment}$ - Gain from Investment = $7,000 (increase in home value) - Cost of Investment = $38,000 (cost of addition) - ROI = $(7000 - 38000) / 38000 \times 100 = -81.58%$### Conclusion:2. Based on the ROI calculation, with an ROI of -81.58%, the addition does not seem to provide a positive return on investment. Therefore, it may not be a good idea to proceed with the addition considering purely financial factors.>**Note:** Financial decisions should consider various factors including long-term benefits, non-monetary value, and personal goals. This analysis is a basic financial assessment based on predicted value increase and addition cost.

The return on investment (ROI) is a financial metric that helps to measure the efficiency of an…

Your friend would like to add an addition to the home. The home was originally purchased for $175,000. The addition would cost $38,000. You expect the addition can improve its value by 4% 1. What is the ROI (write as a percentage)? 2. Is it a good idea (Yes or No, based on ROI)?

Your friend would like to add an addition to the home. The home was originally purchased for $175,000. The addition would cost $38,000. You expect the addition can improve its value by 4% 1. What is the ROI (write as a percentage)? 2. Is it a good idea (Yes or No, based on ROI)?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

Consider a plot of land. You can construct an office building at a cost of $5m or a hotel at a cost of $7m. For the office building you expect an NOI in year 1 of $240,000 and an NOI in year 2 of $400,000. For the hotel you expect an NOI in year 1 of $360,000 and an NOI in year 2 of $500,000. After year 2, the NOI will grow at 4% for both properties. Your discount rate is 10% in both cases. What is the estimated value of your plot of land?
You are thinking of renovating a basement apartment beneath your house, which you currently rent out for $521 per month. If you renovate the apartment, you could get $729 per month instead, starting next month. Assume renovations would cost $10,000, paid immediately, and would take very little time to complete so there’d be no delay in rental income. Assume monthly rental income would last for the foreseeable future (aka forever). If the applicable discount rate is 6% per year, what is the net present value (NPV) of the renovations? Round to the nearest cent.
You are considering the purchase of a Condo in downtown Toronto that you hope to operate as an Airbnb. The monthly mortgage expenses will be about $2215. You expect the cleaning cost to vary with the daily occupation, at the rate of $ 41 per day of occupation. Renting the Condo at $299 per night. How many days must your Condo be occupied if you want to make a monthly profit of $ 2221? (Please give your answer to two significant decimal figures)
you show a revenue of $61.9K and $156K for Charleston and Chapel Hill. If the values of $.1.1M and $848K, are correct, do you think you can show how to get to those values ?
You have to decide whether to invest $100 in a friend's enterprise, where in a year's time the money will increase to $130. You have agreed that your friend will then repay you $120, keeping $10 for himself But instead he may choose to run away with the whole $130. Any of your money that you don't invest in the enterprise you can invest elsewhere safely at the prevailing rate of interest r and get $100 (1+r) next year. For interest rate r> __A___% there is an equilibrium outcome of the infinitely repeated game in which each period you invest with your friend and he repays as agreed. If the rate of interst is 10% per year, an alternative profit-splitting agreement giving $__B___ for the friend is an equilibrium outcome of the infinitely repeated game, where each period you invest with your friend and he repays as agreed. Answer A= ? Answer B= ?
Calculate the appreciation rate of each home. Show your work. Then, write at least two paragraphs that discuss which home you’d like to buy, based on the rate at which it will appreciate and its features. In paragraph 1, include each appreciation rate. Why do you think the appreciation rates are different for each home? Explain your reasoning. In paragraph 2, compare and contrast the features of the homes, based on what you would be looking for in a house. Be sure to state which home you would want to buy. (If you buy Home 1, you think that you will own it for 3.5 years, but if you buy Home 2, you will likely own it for 7.25 years. You’re unsure how long you might stay in Home 3, but you think it would be about 4.75 years.)
I need the answer as soon as possible
If the average price of homes you are considering went from $300 000 to $330 000 last year, it would make sense to estimate that they should be worth around $439 000 in three more years. True False
1) CALCULATE THE B/C RATIO AND STATE WHETHER THE PROJECT IS WORTH DOING (YES/NO). Villa Homes wants to assess the profitability of a new project in which it builds a community center inside a growing neighborhood. Assume that the company leases the equipment it needs for $100,000, that the inflation rate is 4% and that the company expects to see a $200,000 annual profit increase over the next three years. Villa Homes can use the BCR formula to calculate the overall value of this new project.
Next year, in the good state of the world, one parcel of land is worth $130,000 and in the bad state of the world, one parcel of land is worth $30,000. Next year in the good state of the world, one housing unit is worth $250,000 and in the bad state of the world, one housing unit is worth $200,000. Next year, one housing unit will rent for $15,000 regardless of the state of the world. One housing unit currently costs $190,000 and the current risk free rate is 4.00%. How many housing units do you need to buy now to set up a replicating portfolio for land payouts next year?
Your friend has asked you to help him with a capital needs analysis. You calculated that total cash available will be $540,000, your friend’s estate’s obligation will be $130,400, net monthly income required for your friend’s survivor is estimated to be $1,900 per month. Using a 5% discount rate, what would be the amount of total additional capital needed? Select one: a.none of the choice is correct =1900*12/0.05 = 456,000+130,000-540,000 = 46,000 b.$46,400 c.$37,160 d.$36,400
7 years ago, you bought an empty lot for $410893. Your plans have changed so you are thinking about selling it. You received an offer to purchase the lot for $613821. If you sell it at this price, what is the implied return? Answer:

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS