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A developer wants to subdivide a parcel of land into 35 lots to be used for...

A developer wants to subdivide a parcel of land into 35 lots to be used for residential construction. The projected sale price of the developed lots is $1,000,000. The site development costs are set forth below: (5points). Development costs $300,000 Management and supervision 15,000 Contractor’s overhead and profit 100,000 Sales Expense 35,000 Taxes 20,000 Entrepreneurial profit 50,000 TOTAL $520,000 What value is indicated if the development and marketing period is projected to be three years and the market-derived discount rate is 8%?

Solutions

Expert Solution

-300,000
-15,000
-100,000
-35,000
-20,000
-50,000
Total Cost -520,000

Sales is as follows

Y0 Y1 Y3
0 0 1000000

therefore the real profit is the NPV at a rate of 8% = 273,832

jeff jeffy answered 3 years ago
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