Question: Refer to the highest and best use analysis in table below. Use (a) Year 1 NOI (b) ( r g ) (c) R (ac =

Refer to the highest and best use analysis in table below.

Use (a) Year 1 NOI (b) (rg) (c) R (ac = d) Implied Property Value (PV) (e) Construction Cost of Building (d) (e) Implied Land Value(Residual)
Office $ 526,000 0.130.03 0.10 $ 5,260,000 $ 4,000,000 1,260,000
Retail $ 626,000 0.120.04 0.08 7,825,000 $ 6,750,000 1,075,000
Apartment $ 431,000 0.120.03 0.09 4,788,889 $ 3,000,000 1,788,889
Warehouse $ 426,000 0.100.02 0.08 5,325,000 $ 4,000,000 1,325,000

Required:

Suppose that the warehouse income would grow at 3 percent per year instead of 2 percent.

a. Does this change the highest and best use of the site?

multiple choice

  • Yes

  • No

b. What is the new implied land value? (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.)

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