Your firm owns a lot in center city Philadelphia. The purchase price of the lot in 2002 was $350,000 and today its market value is 1.2 million

Your job is to determine which of the following two options would add the most value to the firm.

OPTION 1:

Build an office high rise with 450,000 square feet of office space. The street level will be dedicated to retail.

Expected revenues per square foot of office space is $22

Retail space is expected to rent for $180,000 a year.

The cost of the building is $85 million, it will be depreciated over 39 years (ignore