A developer plans to start construction of a building in two years if, at that point, rent levelsmake construction feasible. At that time, the building will cost $1,000,000 to construct. Duringthe first year after construction (year 3), there is a 50% chance that NOI will be $150,000 and a50% chance that the NOI will be $75,000. In either case, NOI would be expected to increaseat 4% per year thereafter. What is the value of the real option on the vacant land today if therelevant discount rate is 14%?O 109,649O 137,369O 192,36796,183

Answered: Image /qna-images/answer/9af061f7-f4f9-4f8e-a426-29b6ba8fe551.jpg

A developer plans to start construction of a building in two years if, at that point, rent level make construction feasible. At that time, the building will cost $1,000,000 to construct. Du the first year after construction (year 3), there is a 50% chance that NOI will be $150,000 a 50% chance that the NOI will be $75,000. In either case, NOI would be expected to increa at 4% per year thereafter. What is the value of the real option on the vacant land today if th relevant discount rate is 14%? O109,649 137,369 192,367 96,183

A developer plans to start construction of a building in two years if, at that point, rent level make construction feasible. At that time, the building will cost $1,000,000 to construct. Du the first year after construction (year 3), there is a 50% chance that NOI will be $150,000 a 50% chance that the NOI will be $75,000. In either case, NOI would be expected to increa at 4% per year thereafter. What is the value of the real option on the vacant land today if th relevant discount rate is 14%? O109,649 137,369 192,367 96,183

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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RadCo is considering two projects. The first, project A. has $400,000 income after the first year which increases by 8% each year for a total of 5 years. Project B has $450,000 income after the first year which increases by $25,000 each year for a total of 5 years. RadCo can only choose one project. Based on present worth today, which project should RadCo choose? The interest rate is 6% annual compounded annually.
I need this question completed in 10 minutes
Street lighting fixtures and their sodium vapor bulbs for a two-block area of a large city need to be installed at a first cost (investment cost) of $100,000. Annual maintenance expenses are expected to be $6,650 for the first 9 years and $9,500 each year thereafter upto 30 years. With an interest rate of 8% per year, what is the present worth cost of this project? Choose the closest answer below OA. The present worth cost of the project is $236,701. OB. The present worth cost of the project is $248,491. OC. The present worth cost of the project is $189,145 OD. The present worth cost of the project is $281,813 27
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A developer plans to start construction of a building in one year if at that point rent levels make construction feasible. At that time the building will cost $1,340,000 to construct. During the first year after construction would take place, there is a 60 percent chance that NOI will be $175,500 and a 40 percent chance that the NOI will be $88,600. In either case, NOI would be expected to increase at 2 percent per year after the first year. Required: How much should the developer be willing to pay for the land if he wants a 12 percent rate of return? (Round your answer to the nearest whole dollar amount.) Amount payable by developer $ 1,334,444
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