1. A real estate developer is looking at a particular property. If they buy it, it will cost $200,000. They could immediately build an apartment building on it at a cost of $600,000. Their payoff over a 10-year period would be $2,400,000 if there was population growth or $300,000 if there was not. The probability of population growth is .6. They could let the land sit for 3 years and see what happened with the population growth (also estimated to be .6 chance of growth for the first 3 years). At that point, they could sell the land for $450,000 if there had been growth or $100,000 if there had been no growth. They could also either build the building (at a cost of $800,000) or develop the land commercially (at a cost of $600,000). If there is growth in the first 3 years, there is a .80 chance of growth in the last 7 years. If there is no growth in the first 3 years, there is a .3 chance of growth in the last 7 years. The payoffs in the last 7 years for building or developing are given by the following table:

	Growth	No Growth
Build Apartments	$2,200,000	$500,000
Develop Commercially	$1,500,000	$600,000

Formulate and solve a decision tree to help the real estate developer determine the best strategy and the expected payoff from that strategy.