A developer is looking to build a shopping centre at a new highway interchange in Monieville. She has carried out market analysis and determined that this shopping centre is feasible. She has sufficient cash on hand to pay for the land and plans to obtain interim/construction financing to pay for the costs of development. The construction loan will have an interest rate of 10% (j1 = 10%) for the 18-month development period and she requires an effective annual return of 15% (j1 = 15%) on her equity investment. She has asked you for some information before hiring you as a consultant for this project.

Describe the process you would undertake to determine her maximum bid price for the land using the development residual method. What are the specific steps required?