An acre $(43,560$ SF$)$ of land in the CBD is being used as an open parking lot. The land currently

brings $$28/$SF$/$year rent, paid in arrears, and the rent is expected to increase by $2\%$ annually.

The discount rate for the parking lot rents is $8\%.$ An investment project that is being considered

is building a $100,000$ SF office building on the land. The construction will cost $$2,000,000$ and

the building will have a $30$ year productive life after it is built $($after $30$ years, it is assumed

that the building can be demolished and the land can be converted to a parking lot without

additional cost$).$ The construction will take one year$1$

$.$ The resulting office space is expected

to be rented for net $$22/$SF$/$year $($in arrears$)$ starting next year, and the rent is expected to

increase by $1\%$ annually. The required rate of return on office buildings is $11\%.$ Is this a good

investment project?