Rich Landlord owns a dilapidated 30-year-old apartment building in Bristol. The net cash flow from renting the apartments last year was $200,000. He expects those net cash flows from renting the apartments to continue for the remaining useful life of the apartment building, which is 10 years. In 10 years, the value of the property is expected to be $100,000. A developer wants to buy the apartment building from Rich, demolish it, and construct luxury condominiums. He offers Rich $1.5 million for the apartments. Richs opportunity cost of capital is 16 percent. Assume that Rich pays no taxes.

Evaluate the developers offer and make a recommendation to Rich.