Two identical houses are built on the same block by McMillen Co on two 50' x 150' lots. Each lot was recently purchased for $10,000. The constract specified that the builder be paid cost-plus 10% with a maximum of $100,000 per home. The completed costs are 90,000 and 95,000 for building 1 and 2 respectively. The extra costs is due to the additional site preparation to remove trees for site 2. Discuss the following:
a. Do the buildings have the same values? Explain.
b. Do the lots have identical values?
c. What is the nature of the expenditure ifor site preparation? Does it add to or detract from the value of the (i) the structure and (ii) the land?