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 $$102,800$ 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 $(n)$ 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 $$205,600$ per year, grow at $3$ percent per year, and cost $$1$ million to build. Investors currently earn a $10$ percent IRR on such investments. What is the profit to be earned?

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What is the value of this property?

Note: Round your final answer to the nearest dollar amount.

Property value