1. 35 Points You are a financial advisor to the family office of a well known hand surgeon who needs space to expand his practice. The perfect building is for sale. It is at 6050 S. Dixie Highway and the seller is asking $3.5 million for the building, which has 5,000 square feet of rentable space and is on a 10,000 square foot lot with six parking spaces. The doctor thinks he can borrow $2.5 million of the purchase price at an annual rate of 3% with 30 year amortization. The doctor can also lease 5,000 of space in a nearby office tower, with parking, for $25 per square foot under a triple net lease. The doctor requires at least a 10% annual return on investments.

1. The first step in your analysis of whether the doctor should buy the building or let someone else buy it and lease the building from them is to estimate the land value. Briefly, why do you need to estimate the land value? Do you want to estimate high or low on the land value? Briefly, why?