Question
Mr. James has a commercial land near Monash University. He is planning to consider the different uses of this land. Recently, he has been approached
- Mr. James has a commercial land near Monash University. He is planning to consider the different uses of this land. Recently, he has been approached with an offer to buy it for $220,000. Moreover, he is also considering three alternative business projects: X, Y, and Z. He is thinking of operating his business choice indefinitely. He has collected the following information about the uses.
| Alternatives | Initial Investment | Cash flow in the First Year (CF1) | Growth Rate (g) | Cost of capital |
| X | $400,000 | $60,000 | 3.5% | 12% |
| Y | $200,000 | $40,000 | 3% | 10% |
| Z | $500,000 | $75,000 | 3% | 13% |
What is his ranking of these projects based on NPV? Where should we rank the first choice (selling the land) if we take it as NPV?
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Handbook Of Asian Finance REITs Trading And Fund Performance
Authors: David Lee, Greg N. Gregoriou
1st Edition
0128009861, 978-0128009864
