A Real Estate Developer Buys 70 Acres of Land in a Rural

question 68

Essay

A real estate developer buys 70 acres of land in a rural area, planning to build a subdivision on the land if and when the population from the city begins to expand into the area. If population growth is less than anticipated, the developer believes that the land can be sold to a country club that would build a golf course on the property.
a. In what way does the possibility of sale to the country club provide a put option to the developer?
b. What is the exercise price of the option? The asset value?
c. How does the golf course option increase the NPV of the land project to the developer?

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Definitions:

Process Recording

A method used in social work education and practice, involving the detailed documentation of a social worker's interaction with a client, used for training, supervision, and self-reflection.

Progress Notes

Written records kept by professionals to document the progress of a client or case over time, highlighting significant events, interventions, and outcomes.

Narrative Recording

A method of documenting events or observations in a detailed and descriptive form, often used in qualitative research or case studies.

Problem-oriented Recording

A method of documentation focusing on identifying and solving problems, commonly used in fields such as social work and healthcare.