Payton and Finley Davis run a real estate brokerage firm. They have just moved i

Question

Payton and Finley Davis run a real estate brokerage firm. They have just moved into a new building and want to add some outdoor digital signage to advertise the firm’s services. The sign they are considering has two display areas that can display two different images at the same time and costs $138,500. It is expected to have a useful life of 5 years. In an effort to recoup the cost of the sign, Payton and Finley will rent one display panel to other tenants in the building for $35,500 a year. Electricity to power the sign is expected to be $960 per year.

Calculate the annual net operating income generated by the new sign.

Explanation / Answer

Answer:

Revenues generated per year by new sign for PAyton and Finley = $35500

Operating cost per year for new sign = (138500/5) + 960 = $28660

Annual net operating income = Annual revenue - annual operating cost

Annual net operating income = 35500- 28660 = $6840

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