dAcme Investors is considering the purchase of the undeveloped Baker Tract of land. It is currently zoned for agriculturaluse. If purchased, however, Acme must decide how to have the property rezoned for commercial use and then how todevelop the site. Based on its market study, Acme has made estimates for the two uses that it deems possible, that is,office or retail. Based on its estimates, the land could be developed as follows:Rentable square feetRents per square footOperating expense ratioAverage growth in NOI per annumRequired return (r)Total construction cost per square footWhat is the residual land value for Retail?5,177,273 OWhich would be the highest and best use of this site?Which would be the highest and best use of this site?Office100,000$ 29.00Office40%3%13%$. 105Retail80,000$36.2550%Required:What is the residual land value for Office? You'll need to know the cash flow and the cap rate to calculate this.7,422,0003%14%$ 105

It is the value left after deducting the cost of construction from the value of property. The value…

Answered: Acme Investors is considering the…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Home Properties is developing a subdivision that includes 320 home lots. The 150 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the 170 lots in the Hilltop section offer unobstructed views. The expected selling price for each Canyon lot is $42,000 and for each Hilltop lot is $105,000. The developer acquired the land for $2,100,000 and spent another $3,000,000 on street and utilities improvements. Assign the joint land and improvement costs of $5,100,000 to the Canyon section and the Hilltop section using the value basis of allocation. (Do not round your intermediate calculations.) Canyon section Hilltop section Totals Sales Value Numerator Percent of Sales Value Denominator % of Sales Value 0 0 0 Cost to Allocate Allocated Cost Quantity of Lots
Use the following information to answer questions 1 to 5. A development corporation purchased land that will be the site of a new luxury condominium complex. Management is considering a six month market research study designed to learn more about potential market acceptance of the condominium project. Management anticipates that, if conducted, the market research study will provide one of the following two results. 1. Favorable report (F): A significant number of the individuals contacted express interest in purchasing a condominium. 2. Unfavorable report (U): Very few of the individuals contacted express interest in purchasing a condo- minium. After deciding whether to conduct the market research study, they have the following two decision alternatives. d1 = a small complex with 30 condominiumsd2 = a medium complex with 60 condominiumsFollowing this, a chance event concerning the demand for the condominiums has two states of nature. s1 = strong demand for the condominiumss2 = weak…
Home Properties is developing a subdivision that includes 340 home lots. The 200 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the 140 lots in the Hilltop section offer unobstructed views. The expected selling price for each Canyon lot is $47,000 and for each Hilltop lot is $96,000. The developer acquired the land for $1.700,000 and spent another $2,700,000 on street and utilities improvements. Assign the joint land and improvement costs of $4,400,000 to the Canyon section and the Hilltop section using the value basis of allocation. (Do not round your intermediate calculations.) Canyon section Hilltop section Totals Sales Value Numerator Percent of Sales Value Denominator % of Sales Value 0 0 0 Cost to Allocate Allocated Cost Quantity of Lots
Suppose you have 3 sales you can use for comparable sales. Sale 1 and Sale 2 are puritan in relation to land class. Use the puritan sales to determine the price per acre by land class for the third sale using the land class ratio analysis and land adjustment process. Sale 1 has 475 acres of Class 1V land and sold for $300,000. Sale 2 has 600 acres of Class I land and sold for $550,000. Sale 3 has 350 acres of Class I land and 100 acres of Class IV land and sold for $400,000.
Home Properties is developing a subdivision that includes 470 home lots. The 170 lots in the Canyon section are below a ridge and do not have views of the neighboring canyons and hills; the 300 lots in the Hilltop section offer unobstructed views. The expected selling price for each Canyon lot is $51,000 and for each Hilltop lot is $98,000. The developer acquired the land for $2,400,000 and spent another $2,000,000 on street and utilities improvements. Assign the joint land and improvement costs of $4,400,000 to the Canyon section and the Hilltop section using the value basis of allocation. Note: Do not round your intermediate calculations. Canyon section Hilltop section Totals Sales Value Numerator Percent of Sales Value Denominator % of Sales Value Cost to Allocato Allocated Cost
Example: It is proposed to construct a self-financing road tunnel. The criterion is that the toll paid by the vehicles over the life of the project must be sufficient to cover both the initial capital and the other costs which will be incurred over the project's life. Determine a suitable charge on each vehicle passing through the tunnel using the following estimated figures based on 1996 prices. 1. Capital cost Construction cost Land cost Professional fees 2. Annual OMR cost 3. Annual administration cost 4. Replacement cost of autopay ticket machine 5. Estimated annual traffic flow 6. Life of project 7. Required rate of return (real) 8. Estimated inflation rate in the next 20 years $100,000,000 $2,500,000 $5,000,000 $1,000,000 every 5 years 10,000 vehicles per day in the first five years; the growth rate of traffic flow is 30% every 5 years 20 years 12% 10% p.a. (average)
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Use the information provided to answer the questions.Use the information provided below to calculate the following. Where applicable, use the presentvalue tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. QUESTION) Calculate the Accounting Rate of Return (on average investment) of Project B (expressed to twodecimal places). INFORMATION Zeda Enterprises has the option to invest in machinery in projects A and B but finance is only available to invest inone of them. You are given the following projected data:Project A Project BInitial cost R300 000 R300 000Scrap value R40 000 0Depreciation per year R52 000 R60 000Net profitYear 1 R20 000Year 2 R30 000Year 3 R50 000Year 4 R60 000Year 5 R10 000Net cash flowsYear 1 R90 000Year 2 R90 000Year 3 R90 000Year 4 R90 000Year 5 R90 000 Additional informationThe discount rate used by the company is 12%. Transcribed Image Text:Number of Periods 1 2 3 4 5 6 7 8 m 10 11 12 13 14 15 1% 2% 0.9901 0.9804 0.9709 3% 3.9020 3.8077…
Two potential real estate investments are under review by an investment firm. One is a 75,000 square foot office building in Portland, Oregon with a projected pre-tax leveraged IRR of 18.8% and the other is a 54-unit garden apartment building in Scranton, Pennsylvania with a projected pre-tax leveraged IRR of 14.5%. The investment firm should: a. Carefully weigh the projected returns relative to the potential risks of each investment during the due diligence process to determine whether either investment should be chosen b. Choose the Scranton apartment building with the lower expected IRR because it must be a safer investment c. Choose neither investment because both IRRs seem too good to be true in today’s market d.Choose the Portland industrial building with the higher expected IRR because it will definitely appreciate in value more over time
Acme Investors is considering the purchase of the undeveloped Baker Tract of land. It is currently zoned for agricultural use. If purchased, however, Acme must decide how to have the property rezoned for commercial use and then how to develop the site. Based on its market study, Acme has made estimates for the two uses that it deems possible, that is, office or retail. Based on its estimates, the land could be developed as follows: Rentable square feet Rents per square foot Operating expense ratio Average growth in NOI per annum Required return (r) Total construction cost per square foot Office 100,000 $ 42.00 Required: Which would be the highest and best use of this site? Which would be the highest and best use of this site? 40% 3% 13% $118 Retail 80,000 $ 52.50 50% 3% 14% $118
A developer plans to purchase a vacant lot and build apartment units for which represent the highest and best use of the land. Assuming the anticipated NOI for the projected units for $850,000, the market-derived cap rates for the building and land are 11% and 9% respectively, and the projected value of the proposed building is 5,900,000. Based on the land residual technique, the land value would be. a. $2,166,667 b. $2,233,333 c. $2,600,000 d. $2,900,000 The answer falls outside of the range provided. not satisfied from previous answer need well explained , computated and formulated answer

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