Subdivision Development [2917]

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Vacant land can be developed with 20 lots with a market value of $50,000 each.  Development costs are $400,000 payable immediately.  Absorption is estimated at 10 lots in year 1 and 5 lots in years 2 and 3. There will be a sales commission of 10% on each lot.  Assuming a discount rate of 12% what is the value of the vacant land?

 

Column

Rate

Years

Amount

Factor

Value

N/A

N/A

N/A

-$400,000

1.000000

($400,000)

4

12.0%

1

$450,000

0.892857

$401,786

4

12.0%

2

$225,000

0.797194

$179,369

4

12.0%

3

$225,000

0.711780

$160,151

 

 

 

 

 

$341,305

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