Problem 10-11

Refer to the highest and best use analysis in table below.

Use	(a) Year 1 NOI	(b) (rg)	(c) R	(ac = d) Implied Property Value (PV)	(e) Construction Cost of Building	(d) (e) Implied Land Value(Residual)
Office	$ 532,000	0.130.03	0.10	$ 5,320,000	$ 4,000,000	1,320,000
Retail	$ 632,000	0.120.04	0.08	7,900,000	$ 6,750,000	1,150,000
Apartment	$ 437,000	0.120.03	0.09	4,855,556	$ 3,000,000	1,855,556
Warehouse	$ 432,000	0.100.02	0.08	5,400,000	$ 4,000,000	1,400,000

Required:

Suppose that the warehouse income would grow at 3 percent per year instead of 2 percent.

a. Does this change the highest and best use of the site?

multiple choice

Yes

No

b. What is the new implied land value? (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.)