Response:
Greg's profit from the apartment sale = $590,000
Details:
Cost of purchase = $100,000
Renovations = $300,000
Overall Initial Cost = Cost of Purchase + Renovations
Overall Initial Cost = $100,000 + $300,000
Overall Initial Cost = $400,000
Depreciation over 20 Years = Yearly Depreciation * 20
= $2,500 * 20
= $50,000
Net Value after 20 Years = Initial Cost - Depreciation over 20 Years
= $400,000 - $50,000
= $350,000
Capital Gain = Net Sale Price - Net Value
When Net Sale Price = Selling Price - Commission
= $1,000,000 - $60,000
= $940,000
Thus, Capital Gain = Net Sale Price - Net Value
Capital Gain = $940,000 - $350,000
Capital Gain = $590,000
