Suppose you expand northward across 12th street. The gas station across the street can now expect to gain an additional $40,000 annual profit in perpetuity.
a. How will this affect the market price of the property where the gas station sits if the discount rate is 3%? (Show your work. I’m looking for a specific number as part of your answer)
b. According to the Leftover Principle, who will actually benefit from the extra profit – the shopkeeper or the landowner where the store sits?