Armor Investment Company is considering the acquisition of a heavily depreciated building on $10$ acres of land. It expects to rent the building as a storage facility and expects to collect cash flows equal to $$102,000$ next year. However, because depreciation is expected to increase, Armor expects cash flows to decline at a rate of $4$ percent per year indefinitely. Armor expects to earn an IRR on investment return $($r$)$ at $13$ percent.

Required:

a$.$ What is the value of this property?

b$.$ Assume that after five years the building could be demolished and the land could be redeveloped with a strip retail improvement. The latter would produce NOI of $$204,000$ per year, grow at $3$ percent per year, and cost $$1$ million to build. Investors currently earn a $10$ percent IRR on such investments. What is the profit to be earned?