There are 2 way to calculate profit rent
A rent to B at RM 150k
Profit Rent
= market rent - rent paid
= RM 180k - RM 150k
= RM 30k
A rent to B and B sublet to C at RM 200k
Profit Rent
Rent Received - Rent Paid
= RM 200k - RM 150k
= RM 50k
Question :
Find out the capital value of the factory using the investment method for
market rental : RM 180k
paid rent : RM 150k
tenure :leasehold
tenancy : 5 year
risk yield : 9%
Student have to find out the:
1) Profit Rent
2) Present Value
3) Year Purchase Value
4) Capital Value
Answer :
1) Profit Rent
find out Profit Rent formula is Market Rent - Paid Rent
= RM 180k - RM 150k
= RM 30k
2) Present Value
find out PV Present Value using the formula 1 / (1+i )^n
PV = 1 / ( 1 + 0.09 ) ^5
= 1 / ( 1.09 ) ^5
= 1 / 1.5386
=0.6499
3) Year Purchase
find out the YP Year Purchase using the formula (1 - PV) / i
YP = (1 - 0.6499 ) / 0.09
= 0.3501 / 0.09
= 3.8895
4) Capital Value
find out the capital value using formula YP x Profit Rent
Capital Value = 3.8895 x RM 30k
= RM 116,685
