Use the following information to answer the subsequent questions. At site "A" the best current construction project is a retail plaza that would cost $3,000,000 to build exclusive of land cost) and would then generate net rents of $400,000/yr, expected to grow at 2% per year indefinitely. At site "B" the best current construction project is an office building that would generate net rents of $500,000 per year, expected to remain constant. Construction of the office building would cost $4,000,000 exclusive of land cost). Suppose investors require a cap rate current net income as percent of investment) equal to 10% minus the expected annual growth rate in the net income.
-Suppose the current market value of both undeveloped sites is $1,500,000 each. On which site or sites is it currently profitable to develop?

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The Answer of Use the following information to answer the subsequent questions. At site "A" the best current construction project is a retail plaza that would cost $3,000,000 to build exclusive of land cost) and would then generate net rents of $400,000/yr, expected to grow at 2% per year indefinitely. At site "B" the best current construction project is an office building that would generate net rents of $500,000 per year, expected to remain constant. Construction of the office building would cost $4,000,000 exclusive of land cost). Suppose investors require a cap rate current net income as percent of investment) equal to 10% minus the expected annual growth rate in the net income.
-Suppose the current market value of both undeveloped sites is $1,500,000 each. On which site or sites is it currently profitable to develop?

Use the Following Information to Answer the Subsequent Questions