On a certain parcel of land, you could build a project worth $4 million today and the
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On a certain parcel of land, you could build a project worth $4 million today and the construction cost is $3.5 million. If you wait and do not build the project until next year, there is a 50% chance that the project next year will be worth $5.6 million and a 50% chance that it will be worth only $3.0 million, with the construction cost $3.6 million in both cases. Asimilar existing property is worth $ 4 million today and has an expected total return of 9%. The risk-free rate is 3%. What is the value of this land ($ million)?What is the required rate of return for investing in this land?
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