Consider an Investment in Which a Developer Plans to Begin

question 4

Multiple Choice

Consider an investment in which a developer plans to begin construction,of a building that will cost $1,000,000,in one year if,at that point,rent levels make construction feasible.There is a 50 percent chance that NOI will be $160,000 and a 50 percent chance that NOI will be $80,000.Assuming a cap rate of 10 percent (12 percent discount rate and an NOI growth rate of 2 percent) what would the land value be at the completion of the construction,under the real options approach?

• A)$120,000
• B)$200,000
• C)$300,000
• D)$833,333

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Definitions:

Visitor Desires

The interests and preferences of tourists or guests, often a critical factor for businesses in the hospitality and tourism sectors to attract and retain customers.

Park Funding

Financial resources allocated for the maintenance, operation, and development of public parks.

Taxpayers

Individuals or entities that are obligated to make payments to government authorities based on earned income, property ownership, or other taxable activities.

Visitors

Individuals who visit a place other than their usual environment for leisure, business, or other purposes without the intention of settling there.