dAcme Investors is considering the purchase of the undeveloped Baker Tract of land. It is currently zoned for agriculturaluse. If purchased, however, Acme must decide how to have the property rezoned for commercial use and then how todevelop the site. Based on its market study, Acme has made estimates for the two uses that it deems possible, that is,office or retail. Based on its estimates, the land could be developed as follows:Rentable square feetRents per square footOperating expense ratioAverage growth in NOI per annumRequired return (r)Total construction cost per square footWhat is the residual land value for Retail?5,177,273 OWhich would be the highest and best use of this site?Which would be the highest and best use of this site?Office100,000$ 29.00Office40%3%13%$. 105Retail80,000$36.2550%Required:What is the residual land value for Office? You'll need to know the cash flow and the cap rate to calculate this.7,422,0003%14%$ 105

It is the value left after deducting the cost of construction from the value of property. The value…

Answered: Acme Investors is considering the…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 5TP: You own a construction company and have recently received a contract with the local school district...

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Acme Investors is considering the purchase of the undeveloped Baker Tract of land. It is currently zoned for agricultural use. If purchased, however, Acme must decide how to have the property rezoned for commercial use and then how to develop the site. Based on its market study, Acme has made estimates for the two uses that it deems possible, that is, office or retail.Based on its estimates, the land could be developed as follows: Office RetailRentable square feet 100,000 80,000Rents per square foot $24.00 $30.00Operating expense ratio of 40% 50%Avg. growth in NOI per annum 3% 3%Required return (r) 13% 14%Total…
A city that operates automobile parking facilities is evaluating a proposal toerect and operate a structure for parking in its downtown area. Three designs for a facility to be built on available sites have been identified as follows, where all dollar figures are in thousands: At the end of the estimated service life, the selected facility would be torn down and the land would be sold. It is estimated that the proceeds from the resale of the land will be equal to the cost of clearing the site. If the city's interest rate is known to be 10%, which design alternative would be selected on the basis of the benefit-cost criterion?
Metal Recycling and Salvage receives the opportunity to salvage scrap metal and other materials from an old industrial site. The current owners of the site will sign over the site to Enviro at no cost. Enviro intends to extract scrap metal at the site for 24 months and then will clean up the site, return the land to useable condition, and sell it to a developer. Projected costs associated with the project follow: Read the requirements2. Requirement 1. Assuming that Enviro expects to salvage 70,000tons of metal from the site, what is the total project life cycle cost? Total Life-Cycle Costs Variable costs: Metal extraction and processing Fixed costs: Metal extraction and processing Rent on temporary buildings Administration Clean-up Land restoration Selling land Total life-cycle cost Requirement 2. Suppose Enviro can sell the metal for $110 per ton and wants to earn a…
Suppose the company plans to use a building that it owns to house the project. The building could be sold for $5 million after taxes and real estate commissions. How would that fact affect your answer? The potential sale of the building represents an opportunity cost of conducting the project in that building. Therefore, the possible after-tax sale price must be charged against the project as a cost. The potential sale of the building represents an opportunity cost of conducting the project in that building. Therefore, the possible before-tax sale price must be charged against the project as a cost. The potential sale of the building represents an externality and therefore should not be charged against the project. The potential sale of the building represents a real option and therefore should be charged against the project. The potential sale of the building represents a real option and therefore should not be charged against the project. -Select-IIIIIIIVV
Use the following information to answer questions 1 to 5. A development corporation purchased land that will be the site of a new luxury condominium complex. Management is considering a six month market research study designed to learn more about potential market acceptance of the condominium project. Management anticipates that, if conducted, the market research study will provide one of the following two results. 1. Favorable report (F): A significant number of the individuals contacted express interest in purchasing a condominium. 2. Unfavorable report (U): Very few of the individuals contacted express interest in purchasing a condo- minium. After deciding whether to conduct the market research study, they have the following two decision alternatives. d1 = a small complex with 30 condominiumsd2 = a medium complex with 60 condominiumsFollowing this, a chance event concerning the demand for the condominiums has two states of nature. s1 = strong demand for the condominiumss2 = weak…
Use the following information to answer questions 1 to 5. A development corporation purchased land that will be the site of a new luxury condominium complex. Management is considering a six month market research study designed to learn more about potential market acceptance of the condominium project. Management anticipates that, if conducted, the market research study will provide one of the following two results. 1. Favorable report (F): A significant number of the individuals contacted express interest in purchasing a condominium. 2. Unfavorable report (U): Very few of the individuals contacted express interest in purchasing a condo- minium. After deciding whether to conduct the market research study, they have the following two decision alternatives. d1 = a small complex with 30 condominiumsd2 = a medium complex with 60 condominiumsFollowing this, a chance event concerning the demand for the condominiums has two states of nature. s1 = strong demand for the condominiumss2 = weak…
APA is planning to expand its operations and plans to purchase a parcel of land on which to construct a building for their review center, which they will need 5 years hence. The current costs are: land: P2M; building: P3.5M. Since these are not needed immediately, the company plans to defer the purchase of the land and the construction of the building until they are needed. If the value of the land and the cost of the building are expected to appreciate at the rates of 10% and 8% per annum, respectively. What will be the total cost of the investment after 5 years? A. P8,580,275.74 B. P7,244,668.37 C. P8,363,668.27 D. None of these
Adidas is evaluating a proposal for a new product. If they launch the product, they will use an existing facility in the production process, which they previously acquired for $4 million. They currently lease it to a third party, and they expect to continue to do so if they don't use it for the new product. They rent it out for $102,000 and they expect that to remain flat for the foreseeable future. The project requires immediate investment in CAPX of $1.3 million, which will be depreciated on a straight-line basis over the next 10 years for tax purposes. The project will end after eight years, at which time they expect to salvage some of the initital CAPX and sell it for $469,000. The project requires immediate working capital investments equal to 10% of predicted first-year sales. After that, working capital will remain at 10% of the following year's expected sales. They expect sales to be $4.6 million in the first year and to stay constant for eight years. Total…
A real estate investor has the opportunity to purchase land currently zoned as residential. If the county board approves a request to rezone the property as commercial within the next year, the investor will be able to lease the land to a large discount firm that wants to open a new store on the property. However, if the zoning change is not approved, the investor will have to sell the property at a loss. Profits (in thousands of dollars) are shown in the following payoff table: State of Nature Rezoning Approved Rezoning Not Approved Decision Alternative s1 s2 Purchase, d1 600 -200 Do not purchase, d2 0 0 (a) If the probability that the rezoning will be approved is 0.5, what decision is recommended? Recommended Decision: What is the expected profit? Enter your answer in dollars. For example, an answer of $200 thousands should be entered as 200,000. $
Liv Enterprise is considering a national launch of 2 corn chip products under project A and B. The National launch will require the following:Additional manufacturing equipment; Project A: K900, 000.00 and Project B: K1, 000,000.00 Upgrading Existing Facilities; Project A: K100, 000.00 and Project B: K400,000.00 Both of the above would be paid for at the outset and would be depreciated in the accounts over a five year period using straight line with a residual value of for both for Project A and B of zero.Projected revenues and costs over a period of five years are given in table below:Project AYear Revenue Costs1 K1,200,000.00 K1,340,000.002 K2,000,000.00 K1,670,000.003 K2,000,000.00 K1,520,000.004 K2,250,000.00 K1,685,000.005 K2,250,000.00 K1,685,000.00 Project B Year Revenue Costs1 K1,300,000.00 K1,460,000.002 K2,100,000.00 K1,520,000.003 K2,200,000.00 K1,400,000.004…
Show Attempt History Current Attempt in Progress The Bramble Company manufactures 3,800 units of a part that could be purchased from an outside supplier for $14 each. Bramble's costs to manufacture each part are as follows: Direct materials $3 Direct labor Variable manufacturing overhead Fixed manufacturing overhead 9. Total $19 All fixed overhead is unavoidable and is allocated based on direct labor. The facilities that are used to manufacture the part have no alternative uses. (a-b) Gress margin-ISalos Cost/Sales >> F1O F9 FB F7 F6 F5 吕口 F4 F3
Calculate the Net present value of the replacement decision? At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co. is considering replacing an existing piece of equipment. The project involves the following: The new equipment will have a cost of $1,800,000, and it will be depreciated on a straight-line basis over a period of six years (years1-6). The old machine is also being depreciated on a straight-line basis. It has a book value of $200,000 (at year O) and four more years of depreciation left ($50,000 per year). . The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000. Replacing the old machine will require an investment in net working capital (NWC) of $20,000…

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