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Capitalised value from Rs 20,000 monthly rent

Short answer

Annual gross rent Rs2,40,000; outgoings 25% taxes, 20% repairs, and 5% sinking-fund set-aside total Rs1,20,000, leaving net income Rs1,20,000. At 6% interest, YP 16.67 gives capitalized value Rs20,00,000.

A building fetches a gross rent of Rs. 20,000.00 per month. Assuming 25% outgoings for taxes, 20% for repairs and maintenance and 5% to set aside to accumulate the cost of building. Determine its capitalised value at the rate of interest on capital as 6% per annum and 4% on sinking fund installment.

Given: Gross rent = 20,000 × 12 = Rs 2,40,000 per year.

Outgoings and set aside

  • Taxes 25% = Rs 60,000
  • Repairs and maintenance 20% = Rs 48,000
  • Amount set aside for sinking fund (to replace the building cost), 5% = Rs 12,000
  • Total = Rs 1,20,000

Net income = 2,40,000 − 1,20,000 = Rs 1,20,000

The 5% set-aside accumulates at 4% (sinking fund rate) to replace the cost of the building, so it is deducted from the gross rent as an outgoing. The remaining net income is capitalised at the interest rate of 6%.

YP=1006=16.67YP = \frac{100}{6} = 16.67 Capitalised value=1,20,000×16.67=Rs 20,00,000\text{Capitalised value} = 1{,}20{,}000 \times 16.67 = Rs\ 20{,}00{,}000

Answer: Capitalised value of the property is Rs 20,00,000.

✓ Answer checked by Claude Opus 5.5 (high effort)

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