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You have found vacant land for sale that you believe would be a good site for an apartment building. You want to put in a
You have found vacant land for sale that you believe would be a good site for an apartment
building. You want to put in a bid, and as you believe that this is a highly desirable site for
other developers, you want to ensure that your bid is the maximum possible. The following
are your projections for this development: Gross Building Area is square feet.
can build a total of units
Development will take months to build and sell
Estimated sale price of each unit will be R
Closing costs will be of gross value upon completion
Hard costs will be R per square foot of gross buildable area
Soft costs including property tax, consulting fees, and legal fees will be of hard costs
Cash for hard and soft costs will be advanced in equal advances at the beginning of each
month in the development process. Interest will accrue at a rate of j with all
principal and interest due
Calculate the Development financing cost if the Developer borrows soft and hard costs from
the Bank.
The expected market return is percent. The riskfree rate of return is percent, and BC
Co has a beta of Their required rate of return is
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