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I wanna buy this vacant lot somewhere. At t=0, you can buy the vacant lot for $10M. At the end of the 5 th year,
I wanna buy this vacant lot somewhere.
At t=0, you can buy the vacant lot for $10M.
At the end of the 5th year, you probably can sell the land:
The probability =.3 that you sell it for $20M, the probability =.7 that you sell it for $12M.
If the opportunity cost of your fund is 10% per annum and if there is no other cost associated with the land, would you purchase the land? Please be sure to show your calculation.
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