75. An apartment complex has a vacancy rate of 5%. If the apartment's PGI is $450,000, what is the apartment's vacancy cost?
Answer: C
The apartment's vacancy cost is $22,500.
To find the vacancy cost, we multiply the potential gross income (PGI) by the vacancy rate. In this case, 5% of $450,000 results in a vacancy cost of $22,500.
A) $47,500
This option is incorrect because it represents a calculation of a different vacancy rate, specifically 10% of the PGI, which is not relevant to the given 5% vacancy rate. Therefore, it does not reflect the actual vacancy cost.
B) $2,050
This option is incorrect as it significantly underestimates the vacancy cost. It does not align with the 5% vacancy rate applied to the PGI of $450,000, which leads to a much higher figure.
C) $22,500
This is the correct answer, as it accurately reflects the vacancy cost calculated by applying the 5% vacancy rate to the PGI of $450,000. The calculation is straightforward: 0.05 x $450,000 = $22,500.
D) $32,000
This option is incorrect because it does not correspond to any reasonable calculation based on the provided PGI and vacancy rate. It likely stems from a miscalculation or a misunderstanding of the vacancy cost concept.
Conclusion
The vacancy cost of $22,500 is derived directly from the correct application of the vacancy rate to the potential gross income. All other options either represent incorrect calculations or misinterpretations of the vacancy cost concept, making them invalid in this context. Thus, Option C is the only accurate choice.