Consider an investment in which a developer plans to begin construction of a building one year if, at that point, rent levels make construction feasible and the building will cost $1million to construct. There is a 50 percent chance that NOI will be $135,000 and a 50percent chance that NOI will be $81,000.Using thereal optionapproach, what would be the land value of the property assuming a cap rate of 9 percent (12 percent discount rate and an NOI growth rate of 3 percent)?

$1,000,000

$250,000

$300,000

$200,000

$833,333