A bullder has located a plece of property that she would like to buy and eventually build on. The land is currently zoned for four homes per acre, but she is planning to request new zoning. What she builds depends on approval of zoning requests and your anaiysis of this problem to advise her. With her input and your help, the decision process has been reduced to the following costs, alternatives, and probabilitles: Cost of land: $4 million. Probability of rezoning: 0.60 . If the land is rezoned, there will be additional costs for new roads, lighting, and so on, of $1 million. If the land is rezoned, the contractor must decide whether to bulld a shopping center or 1,450 apartments that the tentative pian shows would be possible. If she bullds a shopping center, there is a 60 percent chance that she can sell the shopping center to a large department store chain for $5 million over her construction cost, which excludes the land; and there is a 40 percent chance that she can sell it to an insurance company for $4 million over her construction cost (also excluding the land). if, instead of the shopping center, she decides to bulld the 1,450 apartments, she places probabilities on the profits as follows: There is a 60 percent chance that she can sell the apartments to a real estate investment corporation for $2,000 each over her construction cost, there is a 40 percent chance that she can get \$2,400 each over her construction cost. (Both exclude the land cost) If the land is not rezoned, she will comply with the existing zoning restrictions and simply build 400 homes, on which she expects to make $3,500 over the construction cost on each one (excluding the cost of land). What is the expected value for the rezoned shopping center, If the rezoning cost is included (but land cost is excluded)? Note: Do not round your intermediate calculatlons. Enter your answers in millions rounded to 2 decimal places. Negative amounts should be indlceted by o minus sign. b. What is the expected value for the rezoned apartments, If the rezoning cost is included (but land cost is excluded)? Note: Do not round your intermediote colculations. Enter your answers in millions rounded to 2 decimal places. Negative amounts should be Indlcoted by a minus sign. c. If the land is rezoned, what should the controctor decide? Butld shopping center Bulid apartments d. What is the expected revenue, if the land is not rezoned (excluding the land cost)? Note: Do not round your Intermediate calculations. Enter your onswers in mililons rounded to 2 decimal pleces. Negative omounts should be indicated by a minus sign. e. What is the expected net profit of entire project, including all applicable costs? Note: Do not round your intermediate colculations. Enter your onswers in millions rounded to 2 decimal pleces. Negative omounts should be indicoted by a minus sign
