25.You are considering bidding for a vacant lot. Your research has concluded that one of the following projects, Project A, Project B and Project C, would be the best project to build on this lot. You have gathered the following forecast data on these projects.

Project A: NOI=$1,500,000, Building Cost=$10,000,000, cap rate = 9.5%

Project B: NOI=$800,000, Building Cost = $5,200,000, cap rate = 9.5%

Project C: NOI=$600,000, Building Cost = $4,000,000, cap rate = 9.5%

Assume for simplicity that you are risk neutral, neither cap rates nor building costs will change over the next three years, and that the discount rates will be the same as the cap rates. What would be the maximum amount you would offer for this lot?

Select one:

A. $5,789,474

B. $6,315,789

C. $3,221,053

D. $3,775,439

26.A property could be sold today for $1,950,000 (net of selling expense). It has a loan balance of $1 million and if sold the investor would incur a capital gains tax of $250,000. The investor has determined that if sold today, she would earn an IRR of 15% on equity for the past five years. If not sold, the property is expected to produce after tax cash flow of $50,000 from operations over the next year. At the end of the year, the property value is expected to remain at $1,950,000 (net of selling expense), the loan balance would decrease to $940,000 and the amount of capital gains tax due is expected to increase to $275,000. What is the ATCF from sale if the property is sold today?

Select one:

A. $685,000

B. $650,000

C. $735,000

D. $700,000