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12 September, 13:44

Mr. Brown owned a house, which he rented for $60 a month. The house was assessed at $9000. In 1975 the rate of taxation was increased from $25 to $28 per $1000 assessed valuation. By what amount should the monthly rent have been raised to absorb the increase in that year's taxes?

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  1. 12 September, 17:29
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    We first calculate the percentage increase on the tax

    Old value = 25*9 = 225 ⇒ The value 9 represents the 9 lots of thousands of the house's value

    New value = 28*9 = 252

    Increase in tax = 252 - 225 = 27

    Percentage increase = (27:225) * 100 = 12%

    The amount of yearly rent would be then increased by 12%

    Monthly rent = $60

    Yearly rent = 60*12 = $720

    Increase by 12% = 720*1.12 = 806.4 ⇒ The value 1.12 is the multiplier, obtained from 100%+12%=112%=1.12

    The monthly rent is 806.4:12 = $67.20 which is an increase of $7.20 per month
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