One year ago, you paid $15,500 for an empty plot of land. Today, you are considering developing it into a parking lot. Development will cost you $75,000 today. As a parking lot, you anticipate that it will generate $12,000 in cash one year from today, and this amount will grow by 1% each year thereafter, forever. The required return for this project is 14% annually. Assume that you have no other ideas for what to do with this land; if you don’t build the parking lot, it will not be used for anything else. Also assume for simplicity that you will never sell this land.
What is the NPV of turning this land into a parking lot today?