how to calculate the value of piece of land

Assume the same data as given in Problem 3. Le suppose that you consider to buy a piece of land to build apartments and then sell the apartments right after you build them. . It costs $80.000 per unit to build a 6-unit building (containing 6 apartments). . it costs $90.000 per unit to build a 9-unit apartment building containing 9 apartments) . But now, we consider two periods (two years, depending on the market condition, the market value of a 1-unit apartment will be 2 years later 1 year later now (up market) D. $225,000 150,000 P3100,000 P$135.000 (down market) P. 590,000 P-581.000 To help analyze the situation, we can construct the following decision trees Build 6 units Abandon project Buid 6 units Delay decision Build 9 units Build 6 units Build 6 units Build 9 units Abandon project Delay decision now Build 6 units Build 9 units Build 9 units Delay decision Build 6 units . Le no need to wait until the end of Build 9 units Year 2 to exercise the option: Abandon project Yara early exercise of the option, e.g. right now, or at the end of Year1.is allowed Build 9 units We can think of this as an American call option to delay commitment decision, with the underlying asset being the apartments: choosing to exercise the entions committo build (a) By working with the decision tree from Year-2 backward, decide the best course of action (b) Based on (a), how much would a real estate development company be willing to pay for the piece of land? Assume the same data as given in Problem 3. Le suppose that you consider to buy a piece of land to build apartments and then sell the apartments right after you build them. . It costs $80.000 per unit to build a 6-unit building (containing 6 apartments). . it costs $90.000 per unit to build a 9-unit apartment building containing 9 apartments) . But now, we consider two periods (two years, depending on the market condition, the market value of a 1-unit apartment will be 2 years later 1 year later now (up market) D. $225,000 150,000 P3100,000 P$135.000 (down market) P. 590,000 P-581.000 To help analyze the situation, we can construct the following decision trees Build 6 units Abandon project Buid 6 units Delay decision Build 9 units Build 6 units Build 6 units Build 9 units Abandon project Delay decision now Build 6 units Build 9 units Build 9 units Delay decision Build 6 units . Le no need to wait until the end of Build 9 units Year 2 to exercise the option: Abandon project Yara early exercise of the option, e.g. right now, or at the end of Year1.is allowed Build 9 units We can think of this as an American call option to delay commitment decision, with the underlying asset being the apartments: choosing to exercise the entions committo build (a) By working with the decision tree from Year-2 backward, decide the best course of action (b) Based on (a), how much would a real estate development company be willing to pay for the piece of land