How much is land parcel worth in terms of annual land rent

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Question: Suppose the most productive use of a particular site is as a high-volume, upscale restaurant, which can generate revenues of $600,000 per year. The operating expenses, including labor, food, and utilities (everything except rent) are $450,000 per year. The building can be built and equipped for $1 million, which can be paid for by a perpetual loan with interest of $100,000 per year. According to the residual theory, how much is the land parcel worth in terms of annual land rent?

Reference no: EM131733997

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