EGI is $410,000 and operating expenses including reserves total $168,000. Net operating income is:
Correct Answer
D) $242,000
Why this is correct: Net Operating Income (NOI) = Effective Gross Income (EGI) - Operating Expenses (including reserves). Calculation: $410,000 - $168,000 = $242,000. Why the other choices are wrong: '$205,000, using a fifty percent expense ratio' incorrectly applies a generic ratio instead of the given numbers. '$578,000 combining the two figures' mistakenly adds instead of subtracts. '$168,000, the expense total itself' is just the expense figure, not NOI. Exam tip: NOI = EGI - Total Operating Expenses. It's a simple subtraction; the challenge is ensuring all proper expenses are included.
Why This Is the Correct Answer
Why this is correct: Net Operating Income (NOI) = Effective Gross Income (EGI) - Operating Expenses (including reserves). Calculation: $410,000 - $168,000 = $242,000. Why the other choices are wrong: '$205,000, using a fifty percent expense ratio' incorrectly applies a generic ratio instead of the given numbers. '$578,000 combining the two figures' mistakenly adds instead of subtracts. '$168,000, the expense total itself' is just the expense figure, not NOI. Exam tip: NOI = EGI - Total Operating Expenses. It's a simple subtraction; the challenge is ensuring all proper expenses are included.
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