Question

Jack MacLean has entered into a real estate development partnership with Bill Lyons and June Reese. Bill owns one-fifth of the partnership, while June has a one-fourth interest. The partners will divide all profits on the basis of their fractional ownership. The partnership bought 900 acres of land and plans to subdivide each lot into 2.5 acres. Homes in the area have been selling for $250,000. By time of completion, Jack estimates the price of each home will increase by one-fifth of the current value. The partners sent a survey to 21,000 potential customers to see whether they should heat the homes with oil or gas. One-fifth of the customers responded by indicating a 5-to-1 preference for oil. From the results of the survey, Jack now plans to install a 270-gallon oil tank at each home. He estimates that each home will need five fills per year. The current price of home heating fuel is $3 per gallon. The partnership estimates its profit per home will be one-tenth of the selling price of each home. (Do not round intermediate calculations.) a. Calculate the number of homes to be built. b. Calculate the selling price of each home. c. Calculate the number of people responding to survey. d. Calculate the number of people desiring oil. e. Calculate the average monthly cost per house to heat using oil. (Round your answer to 2 decimal places.) f. Calculate the amount of profit Jack will receive from the sale of homes.

Answer 1

a, Number of homes to be built

Number of homes to be built =total acres of land / acres of land in each lot

Total acres of land                       = 900 acres

Acres of land in each lot              =2.5 acres

                                                         =900/2.5

                                                         =360

   Number of homes to be built =360 homes

b, selling price of each home

  The current selling price of homes in area are = $250000

   Jack estimates 1/5 increase in price

    So the selling price of each home will be

                                                                                       = 1+ (1/5) *$250000 = $300000

Selling price of each home                                       = $300000

C, Number of people responded to survey

Total number of people in survey                       = 21000

Number of People responded to survey             = 1/5 of the total people in survey

  Number of people responded to survey            = 21000*(1/5)

                                                                                      =4200 people

d, Number of people desiring oil

As we calculated earlier the people responded to survey = 4200 people

Their preference for oil to gas was    5:1 i.e.

Number of people prefer oil =         4200*(5/6) = 3500 people