A developer plans to start construction of a building in two years if, at that point, rent levelsmake construction feasible. At that time, the building will cost $1,000,000 to construct. Duringthe first year after construction (year 3), there is a 50% chance that NOI will be $150,000 and a50% chance that the NOI will be $75,000. In either case, NOI would be expected to increaseat 4% per year thereafter. What is the value of the real option on the vacant land today if therelevant discount rate is 14%?O 109,649O 137,369O 192,36796,183

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A developer plans to start construction of a building in two years if, at that point, rent level make construction feasible. At that time, the building will cost $1,000,000 to construct. Du the first year after construction (year 3), there is a 50% chance that NOI will be $150,000 a 50% chance that the NOI will be $75,000. In either case, NOI would be expected to increa at 4% per year thereafter. What is the value of the real option on the vacant land today if th relevant discount rate is 14%? O109,649 137,369 192,367 96,183

A developer plans to start construction of a building in two years if, at that point, rent level make construction feasible. At that time, the building will cost $1,000,000 to construct. Du the first year after construction (year 3), there is a 50% chance that NOI will be $150,000 a 50% chance that the NOI will be $75,000. In either case, NOI would be expected to increa at 4% per year thereafter. What is the value of the real option on the vacant land today if th relevant discount rate is 14%? O109,649 137,369 192,367 96,183

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EA: Gardner Denver Company is considering the purchase of a new piece of factory equipment that will...

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