Question 6 A developer, plan to start construction of a building in one year under the condition that rent levels make construction feasible. The construction costs amounts to $900,000 and there is a 50% chance that the NOI will be $150,000 or a 50% chance that NOI will be $80,000. In either case NOI is expected to grow with 2%/year after the first year. The discount rate, r= 12% A) How much should the developer be willing to pay for the land B) Based on the option value Approach what would the land value be? ( use the same figures and assumptions as in a) above)|