Use (a) Year 1 NOI (b) (r−g) (c) R (a÷c = d) Implied Property Value (PV) (e) Construction Cost of Building (d) − (e) Implied Land Value(Residual) Office $ 510,000 0.13−0.03 0.10 $ 5,100,000 $ 4,000,000 1,100,000 Retail $ 610,000 0.12−0.04 0.08 7,625,000 $ 6,750,000 875,000 Apartment $ 415,000 0.12−0.03 0.09 4,611,111 $ 3,000,000 1,611,111 Warehouse $ 410,000 0.10−0.02 0.08 5,125,000 $ 4,000,000 1,125,000 Required: Suppose that the warehouse income would grow at 3 percent per year instead of 2 percent. a. Does this change the highest and best use of the site? multiple choice
Use (a) Year 1 NOI (b) (r−g) (c) R (a÷c = d) Implied Property Value (PV) (e) Construction Cost of Building (d) − (e) Implied Land Value(Residual) Office $ 510,000 0.13−0.03 0.10 $ 5,100,000 $ 4,000,000 1,100,000 Retail $ 610,000 0.12−0.04 0.08 7,625,000 $ 6,750,000 875,000 Apartment $ 415,000 0.12−0.03 0.09 4,611,111 $ 3,000,000 1,611,111 Warehouse $ 410,000 0.10−0.02 0.08 5,125,000 $ 4,000,000 1,125,000 Required: Suppose that the warehouse income would grow at 3 percent per year instead of 2 percent. a. Does this change the highest and best use of the site? multiple choice
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
Related questions
Question
Refer to the highest and best use analysis in table below.
| Use | (a) Year 1 NOI |
(b) (r−g) |
(c) R |
(a÷c = d) Implied Property Value (PV) |
(e) Construction Cost of Building |
(d) − (e) Implied Land Value(Residual) |
|---|---|---|---|---|---|---|
| Office | $ 510,000 | 0.13−0.03 | 0.10 | $ 5,100,000 | $ 4,000,000 | 1,100,000 |
| Retail | $ 610,000 | 0.12−0.04 | 0.08 | 7,625,000 | $ 6,750,000 | 875,000 |
| Apartment | $ 415,000 | 0.12−0.03 | 0.09 | 4,611,111 | $ 3,000,000 | 1,611,111 |
| Warehouse | $ 410,000 | 0.10−0.02 | 0.08 | 5,125,000 | $ 4,000,000 | 1,125,000 |
Required:
Suppose that the warehouse income would grow at 3 percent per year instead of 2 percent.
a. Does this change the highest and best use of the site?
multiple choice
-
Yes
-
No
b. What is the new implied land value? (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.)
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