An investor is considering buying some land for $100,000 and constructing an office building on it. Three different buildings are being analyzed.
Building Height
2 Stories 5 Stories10
Stories
Cost of building $400,000 $800,000$2,100,000
(Excluding cost of land)
Resale value* of land 200,000 300,000400,000 and building at end 20-year analysis period
Annual rental income 70,000 105,000256,000 after all operating expenses have been deducted Resale value to be considered a reduction in cost, rather than a benefit. Using benefit-cost ratio analysis and an 8% MARR, determine which alternative, if any, should be selected.