ASSIGNMENT CASE

o Calculate the expected value of an outcome, given its nominal value and probability of occurrence.

o Summarize data bearing on a quantitative decision.

o Represent the decision-making process as a decision tree

You're expected to provide references and citations. It's recommended you use the sources listed in the Module. Resist the temptation to browse the Web, looking for "clues." There's a lot of confusing stuff out there, and much of it is irrelevant. This Module contains all the information you need. Study it - use it!

All land within the municipality of Springfield is zoned for either agricultural, residential or commercial use. You have just purchased a parcel of agricultural land for $20,000 in the expectation that it will be rezoned next year. But the rezoning is controversial, and will be decided by the full City Council rather than just the Zoning Commission.

According to your inside sources, there's a 30% chance the land will be rezoned for commercial use; in that event, you'll be able to sell the land for $50,000. But the populists on the Council are pushing for more affordable housing; if they win the vote, which your sources think has a likelihood of 50%, then the land will be rezoned for residential use, and you'll only be able to sell it for $30,000. Of course, the Greens may win, and the land won't be rezoned at all. In that event, it will still be worth what you paid for it, but no more than that.

You've just been approached by Mr. Hi Roller. He's a land speculator like yourself, but he doesn't have your inside sources. He thinks the land will be rezoned next year, and has offered you $30,000 cash for it, right now.

Which alternative should you choose? Explain your decision process in detail.

Please read and heed the hints given in Case 1. The same general advice is applicable in this Case, in particular:

1. Read the source materials before beginning.

2. The Case is about decision trees, not flipping real estate.

3. Follow standard format. A cover page, a short discussion, references and citations are all required.

Attachment:- assignment2.pdf