Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You own a vacant piece of land.After extensive market research, you find the Highest and Best Use (HBU) of the land is to construct an

You own a vacant piece of land.After extensive market research, you find the Highest and Best Use (HBU) of the land is to construct an apartment building on it. The cost of constructing a brand new apartment building is $3.7 million at which point the property will be worth $5 million (based on the cash flows an operator can get from it).

1. An out-of-state developer offers you $1.5 million to purchase the land right now.Should you sell it?Explain with reference to your analysis of the Value of a Vacant Piece of Land.

2.You commission a professional appraisal (valuation) of your property. The appraiser informs you that your Property Value (land and building) is $8.5 million as-is today.

At its new HBU (a brand new office building) your parcel would be worth $10.2 million.Offhandedly, the appraiser warns you that the gap between the two values is only likely to widen as time goes on.

The cost of redeveloping the site today is $4.0 million. Should you redevelop it now?Explain your reasoning with the relevant calculations.

3.Assuming the proposed redevelopment necessitated demolishing your building and starting from scratch (a cost already included in the redevelopment cost), what is the current value of your building (just the structure)?Show your work.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management For Decision Makers

Authors: Peter Atrill

7th Edition

129201606X, 978-1292016061

More Books

Students also viewed these Finance questions

Question

5. How can I help others in the network achieve their goals?

Answered: 1 week ago