What is the most you would be willing to pay for the land

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Reference no: EM131051667

Suppose a piece of land is available for purchase in a prime location to place a Verizon Wireless Store. If the store will be successful it will be worth $5 million in present value, if not it will be worth -$6 million for an overall NPV of -$1 million assuming you always build (which you won’t, only if it’s good). What is the most you would be willing to pay for the land? Assume it takes 1 year to know if building the store is a good idea, the risk free rate for that year is 5%, and the land is worth $100,000 once it is certain a store won’t work there.

Reference no: EM131051667

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