Problem Solving

Q. Mr. A purchased a house for Rs 1000000 in 1995, he spent Rs 100000 for routine maintenance & upkeep of the house. 1n 1999 he sold the house for 25% of more then what he paid for it. He paid 5% of the proceeds as gain tax & he has to pay 50% of his net profit to the broker, what is his net income?

Joy Shaha wrote:Q. Mr. A purchased a house for Rs 1000000 in 1995, he spent Rs 100000 for routine maintenance & upkeep of the house. 1n 1999 he sold the house for 25% of more then what he paid for it. He paid 5% of the proceeds as gain tax & he has to pay 50% of his net profit to the broker, what is his net income?

Net Income = Money in - Money Out

Money in = sale price = 1.25 * 1,000,000 = 1,250,000

Money out = purchase cost + maintenance + gain tax + broker commission

purchase cost = 1,000,000
maintenance = 100,000
gain tax = .05 x 1,250,000 = 62,500

It's unclear what "net profit" means for which the broker gets his commission, but let's assume it's the difference between the sales price and the purchase cost, without regard to maintenance cost, so

broker commission = .5 x (1,250,000 - 1,000,000) = 125,000

Total Money Out = 1,287,500

Therefore, Net Income = 1,250,000 -1,287,500 = -37,500