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You own a piece of raw land in an up-and-coming area in Gotham City. The costs to construct a building increase disproportionately with the size
You own a piece of raw land in an up-and-coming area in Gotham City. The costs to construct a building increase disproportionately with the size of the building. A building of a square feet costs 0.1x02 to build. After you construct a building on the lot, it will last forever, but you are committed to it: You cannot put another building on the lot. Buildings currently rent at $97 per square foot per month. Rents in this area are expected to increase in five years. There is a 54% chance that they will rise to $205 per square foot per month and stay there forever and a 46% chance that they will stay at $97 per square foot per month forever. The cost of capital is fixed at 11.9% per year. a. Should you construct a building on the lot right away? If so, how large should the building be? b. If you choose to delay the decision, how large a building will you construct in each possible state in five years? FOTO a. Should you construct a building on the lot right away? If so, how large should the building be? If you choose dolay the decision, how large a building should you construct in the $205/sq. ft. state in five years? It should be sq.ft. (Round to a whole number.) Help me solve this View an example Get more help Clear all Check answer You own a piece of raw land in an up-and-coming area in Gotham City. The costs to construct a building increase disproportionately with the size of the building. A building of a square feet costs 0.1x02 to build. After you construct a building on the lot, it will last forever, but you are committed to it: You cannot put another building on the lot. Buildings currently rent at $97 per square foot per month. Rents in this area are expected to increase in five years. There is a 54% chance that they will rise to $205 per square foot per month and stay there forever and a 46% chance that they will stay at $97 per square foot per month forever. The cost of capital is fixed at 11.9% per year. a. Should you construct a building on the lot right away? If so, how large should the building be? b. If you choose to delay the decision, how large a building will you construct in each possible state in five years? FOTO a. Should you construct a building on the lot right away? If so, how large should the building be? If you choose dolay the decision, how large a building should you construct in the $205/sq. ft. state in five years? It should be sq.ft. (Round to a whole number.) Help me solve this View an example Get more help Clear all Check
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