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What would be the land value of the property

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Reference no: EM132505803

Consider an investment in which a developer plans to begin construction of a building one year if, at that point, rent levels make construction feasible and the building will cost $1 million to construct. There is a 50 percent chance that NOI will be $135,000 and a 50 percent chance that NOI will be $81,000. Using the real option approach, what would be the land value of the property assuming a cap rate of 9 percent (12 percent discount rate and an NOI growth rate of 3 percent)?

Reference no: EM132505803

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