Question

A real estate developer wants to develop a commercial building lot. The marketing people investigate the area and determine a need for both a retail facility and a supermarket. A construction manager and the operation personnel come up with the following projections: Retail Facility Supermarket Size in square feet 95,000 20,000 Cost per square foot $64.45 $62.20 Total Cost $6.12 million $1.24 million Economic Life 20 years 15 years Projected yearly income $1 million $320,000 Required loan amount 150,000 50,000 The developer evaluates project using an interest rate of 15 percent as a measure of the cost of capital. Which project should she pursue?

Answer 1