A 50-acre site is on the market for $3,000,000. A developer believes that 250 single family...
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A 50-acre site is on the market for $3,000,000. A developer believes that 250 single family lots can be sold for $25,000 per lot over a three-year period. Marketing and commission costs are estimated to be 7% of sales. Development costs are estimated at $25,000 per acre and will be incurred in year one. Assume taxes to be $25,000 in year one, $20,000 in year two and $10,000 in year three. The "typical" developer's overhead and profit for the area is 20% of retail sales. Given a discount rate of 13% and annual accounting, what is the indicated value of the raw land? A 50-acre site is on the market for $3,000,000. A developer believes that 250 single family lots can be sold for $25,000 per lot over a three-year period. Marketing and commission costs are estimated to be 7% of sales. Development costs are estimated at $25,000 per acre and will be incurred in year one. Assume taxes to be $25,000 in year one, $20,000 in year two and $10,000 in year three. The "typical" developer's overhead and profit for the area is 20% of retail sales. Given a discount rate of 13% and annual accounting, what is the indicated value of the raw land?
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To determine the indicated value of the raw land we need to calculate the present value of the expec... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0071339476
Volume 1, 6th Edition
Authors: Beechy Thomas, Conrod Joan, Farrell Elizabeth, McLeod Dick I
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