Question

A property fetch a net annual income of Rs. 80,000/- after deducting all outgoings. Rate of interest is 6% per annum. What is the capitalized value of the property?
1. Rs. 13,33,333 /-
2. Rs. 9,60,000 /-
3. Rs. 16,63,500 /-
4. Rs. 9,33,900 /-

Answer 1

Correct Answer - Option 1 : Rs. 13,33,333 /-

Concept:

The capitalized value of a property is the amount of money whose annual interest at the highest prevailing rate of interest will be equal to the net income from the property.

To determine the capitalized value of a property, it is required to know the net income from the property and the highest prevailing rate of interest.

capitalized value = Net annual income × Year's purchase.

Where Year's purchase = 100/rate of interest

Net annual income = Capitalized value of property × ROI/100

Calculation:

Given,

Rate of Interest = 6%

Annual income = 80,000/- after deducting all outings.

80,000 = Capitalized value × (6/100)

Capitalized Value = 80,000 × (100/6)

Capitalized Value = 13,33,333.33/-