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2. GammaGo is a real estate company. It is considering to develop a community of single-family houses (Project House) at to. Project House costs 100
2. GammaGo is a real estate company. It is considering to develop a community of single-family houses (Project "House") at to. Project House costs 100 at to and 88 at t. This project alone can generate profits 242 at t2. Once GammaGo decides to invest in Project House, it needs to pay the costs at to and t. At t, GammaGo suddenly finds that it can also build a bunch of condos (Project "Condo"). Project Condo costs 80 at t and can generate profits 110 at t2. Suppose that at to, Gamma Go does not know that Project Condo is available at t; that is, at to, it thinks that Project House is the only project available. The rate of return is 10%. (a) Will GammaGo invest in Project House at to? (b) If Project House and Project Condo are independent, will GammaGo invest in Project Condo at t? However, Condos will reduce the demand for single-family houses. So, if the Project Condo is taken, the profit generated by Project House will decrease to 209. (c) Will GammaGo invest in Project Condo at ti
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