A real estate developer is considering the purchase a large 20 acre piece of farmland for $4 million.  It will cost an additional $7 million to install roads, sidewalks, and utilities (water, hydro, gas, storm & sanitary sewers).  The developer is planning on allocating these costs based on acreage.

 

At the end of the process, the farmland will be converted and zoned into three types of land: industrial, commercial and residential. At this point, the developer plans on further developing the land into industrial buildings, commercial buildings and residential buildings.

 

In order to encourage the real estate developer to develop this land, the City Council is allowing the developer to choose the zoning for this farmland project.  The developer can either choose either residential, commercial or industrial zoning, or any combination of the three options.

 

Information about developing the 20 acres of land is as follows

	Industrial	Commercial	Residential
Final Selling Price per building (in $)	5.0 million	3.0 million	$800,000
Variable cost per building (in $)	3.2 million	1.7 million	$600,000
Land required per building (in acres)	1 per 3 acres	1 per 2 acres	10 per acre
Maximum potential demand (in buildings)	2	4	100

 

Make a recommendation to the developer.  Include both quantitative and qualitative considerations.

Answer rating: 100% (QA)

To make a recommendation to the real estate developer well need to consider both quantitative and qualitative factors Lets analyze the options based o... View the full answer