Real Estate Finance & Investments 15th Edition by William Brueggeman, Jeffrey Fisher

Exercise 1

Refer to Concept Box 17.1. A revised market study indicates the following: pricing for standard interior lots will probably be $103,000 each, premium interior lots $118,000, and corner lots $125,000; the average development cost per lot has been revised up to $71,000; administrative costs, etc., remain at 12.5 percent of gross revenue.
a. Can the same 18 percent return on total cost continue to be maintained
b. Suppose the developer wants a 21 percent return on cost. How much can be paid for the land
(For Reference Concept Box 17.1)