Real Estate Math
A North Dakota investor pays $425,000 for a property and wants a 10% annual cash-on-cash return. If they invested $85,000 (20% down), what annual cash flow do they need?
A$42,500
B$8,500✓ Correct
C$4,250
D$85,000
Explanation
Cash-on-cash return = Annual cash flow ÷ Cash invested. Desired cash flow = Cash invested × Required return = $85,000 × 10% = $8,500 per year.
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