Mr Raghav, a builder owns a plot of land that can be used for either 8 or 12 apartment units. The construction cost for the two alternatives are Rs. 18 million and Rs. 31 million respectively. The current market price per apartment is Rs 3 million. . The yearly rental (net of expenses) per unit is Rs. 0.25 million and the risk free rate is 6% pa. If the market for apartment is buoyant next year, each apartment unit will sell for Rs. 3.751 million, if the market is sluggish each apartment unit will be sold off at Rs. 2.70 million. 

Calculate the value )fthe vacant plot and advice the builder if to sell he apartments immediately or retain them for one rear.

Answer rating: 100% (QA)

Analyzing Mr Raghavs Options Sell Now or Hold 1 Calculate net present value NPV for each option Option A Sell apartments now Revenue from 8 units8 3 m... View the full answer