An appraiser is valuing a small office building. The building has a gross leaseable area of $20,000$ square feet and a net leaseable area of $18,200$ square feet. Data from a cost estimation service indicates the base construction cost is $$65$ per square foot of gross area. The property has an effective age of $8$ years and an estimated remaining economic life of $67$ years.

Many of the properties in the area rent the land $($site$)$ on which the building occupies $($a land lease$).$ Based on a comparable lease analysis, you find that the site generates net income $($year $1)$ of $$37,000$ annually and which is expected to increase $$1,500$ per year. Most land valuations of this type are conducted using a $5$ year holding period. The analysis of the market also reveals that overall discount rate for land is $12\%,$ future selling expenses are $5\%,$ property values are expected to increase $3\%$ per year over the holding period, and current mortgage interest rates are at $4\%.$

Hint $-$ the first paragraph provides information related to the improvements on the site and the second paragraph contains information related to the site.

a$.(4$ points $-$ you must show your work to receive credit$)$ What is the current depreciated value of the improvements?

$]=67[$

b$.(4$ points $-$ you must show your work to receive credit$)$ Re$-$estimate the current depreciated value of the improvements, if you believe there is $$25,000($total$)$ in curable physical deterioration and functional obsolescence. Note that if these items are cured, the effective age of the property drops to $5$ years and the remaining economic life increases to $70$ years.

RECORD YOUR FINAL ANSWER HERE: $$18,031,934$

$N=10$

$I=4$

$PV=1158000$

$P_{mt}=0$

$FV=$

c$.(10$ points $-$ you must show your work to receive credit$)$ Using a DCF method, what is the value of the land $($please do not make any assumptions regarding a terminal capitalization rate$)?$