1. After many studies, it was determined that, if a certain site is used in the best...
Question:
1. After many studies, it was determined that, if a certain site is used in the best and highest way (that is, in the most profitable legal way), it will generate a cash flow of 1000 dollars per month. The total cost per month of nonland inputs is 600 dollars.These nonland costs include wages, the profit rate of whomever is renting the property and running the business (remember, the cost of the entrepreneur's time is part of the opportunity cost), materials and other inputs, and any other expense that is unrelated to land.Thus, the rent of the property should be:
2. Consider your answer to Question 1. Assume the rate of return (discount) is 10%. If the owner of the property is expected to receive the same rent in perpetuity, the value of the property should be:
3.Assume the owner of the property is trying to sell it. If we assume perfect competition, that is, that there are many developers competing for properties and that there is perfect information in the market, you expect the property to sell for: