Lakeshore Development Corporation LDC purchased land not far from the intersection of Highway 427 and The Queensway. The top managers of LDC , however, have different opinions on how this land can be used. Eventually, LDC commissioned preliminary architectural drawings for three different projects: Residential Towers; Mid-Rise Condos; Bungalow Complex. Also, it is recognized that the financial success of the project depends on the situation on the real estate market, Strong Demand or Weak Demand.The LDC expectations are summarized in the following table (payoffs are in $millions).

Decision Alternatives	States of Nature
Strong Demand	Weak Demand
Residential Towers	26	-11
Mid-Rise Condos	11	9
Bungalow Complex	16	5

Originally, LDC specialists counted on 0.61 probability of strong demand.

Simple Decision Tree Part (a) Suppose that you need to construct a simple decision tree that shows the logical sequence of the decision problem. Select the correct sketch of the decision tree based on the information above. Note that P(S)=probability of strong demand, P(W)=probability of weak demand. Also, we use the following notations: Pq=Payoff 1, P2=Payoff 2 , P3=Payoff 3, P4=Payoff 4, P5=Payoff 5, P6=Payoff 6. OP(S) = 0.61 , P(W) = 0, P1 = 26 , P2 = - 11, P3 = 11 , PA = 9 , Ps = 16, P6 = 5 Residential Towers Residential Towers Payoff 1 Payoff 4 P(S) P(W) Strong Mid-Rise Condos Weak Mid-Rise Condos C O C Payoff 2 Payoff 5 Bungalow Complex Bungalow Complex Payoff 3 Payoff 6OP(F) = 0.9155 , P(U) = 0.8476 P(F)=P( Favorable Report) Hire Favorable Report Do not hire Residential Towers P(U)=P(Unfavorable Report) Hire In Do not hire branch Unfavorable Report use EMV of the optimal Do not hire decision alternative or include the whole decision tree from the Hire Simple Decision Tree P(F)=P(Favorable Report) part of the solution. Favorable Report Do not hire Mid-Rise Condos O P(U)-P(Unfavorable Report) Hire Unfavorable Report Do not hire P(F)-P( Favorable Report) Hire Favorable Report Bungalow Complex O P(U)=P(Unfavorable Report) Hire Unfavorable ReportO P( Hire) = 0.9 , P(Do not hire) = 0.87 Favorable Report P(Hire) In Favorable report Hire branch use EMV of the optimal decision Unfavorable Report alternative or include the whole decision tree O Favorable Report from the Simple Decision Tree part of P(Do not Hire) the solution. Do not hire Unfavorable Report O None of the above.(g) Construct the revised decision tree and answer the following questions. Round all EMV answers to 2 decimal places. . In case of favorable report, EMV(Residential Towers) = EMV( Mid-Rise Condos) = EMV(Bungalow Complex) = . In case of unfavorable report, EMV(Residential Towers) = EMY( Mid-Rise Condos) = EMV(Bungalow Complex) = . In the revised decision tree, there are the expected monetary values EMV(Hire) = EMV(Do not hire) =[i] How much would Lakeshore Development Corporation be willing to pay at most for the information about future economic conditions? If you recommend not hiring KEG, please enter zero in the answer cell. Keep 2 decimal places in the following answer. LDC can pay up to {in $ millions) {j} How efficient the KRG information would be? If you recommend not hiring KEG, please enter zero in the answer cell. Round your answer to 1 decimal place. Efficien cy || .33, OP(S) = 0.61 , P(W) = 0.39, P1 = 26 , P2 = - 11 , P3 = 11 , PA = 9, Ps = 16 , P6 = 5 Residential Towers Payoff 1 P(S) Strong Mid-Rise Condos O Payoff 2 Bungalow Complex Payoff 3 Residential Towers Payoff 4 P(W) Weak Mid-Rise Condos Payoff 5 Bungalow Complex Payoff 6OP(S) = 0.61 , P(W) = 0.39, P1 = 26 , P2 = - 11 , P3 = 11 , PA = 9 , Ps = 16 , P6 = 5 P(S) Strong Payoff 1 Residential Towers O P(W) Weak Payoff 2 P(S) Strong Mid-Rise Condos Payoff 3 O P(W) Weak Payoff 4 P(S) Strong Payoff 5 Bungalow Complex O P(W) Weak Payoff 6OP(S) = 0.39 , P(W) = 0.61, P1 = 26 , P2 = 11 , P3 = 16, PA = - 11, Ps = 9, P6 = 5 P(S) Strong Payoff 1 Residential Towers P(W) Weak Payoff 2 P(S) Strong Payoff 3 O Mid-Rise Condos P(W) Weak Payoff 4 P(S) Strong Payoff 5 Bungalow Complex P(W) Weak Payoff 6 O None of the above.(b) Using the sketch from the previous question and TreePlan, construct a simple decision tree. Based on the simple decision tree answer the following questions. Keep 2 decimal places in the EMV answers. . Find the expected monetary value for Residential Towers decision. EMV(Residential Towers) . Find the expected monetary value for Mid-Rise Condos decision. EMV( Mid-Rise Condos) = . Find the expected monetary value for Bungalow Complex decision. EMV(Bungalow Complex) = (c) Using the simple decision tree determine the best decision policy. O Go ahead with Mid-Rise Condos project if the demand is strong. O Support Bungalow Complex project. O Construct Residential Towers if the demand is strong. O Go ahead with Mid-Rise Condos project. O Construct Residential Towers. O Support Bungalow Complex project if the demand is strong. O None of the above.(d) Suppose that you need to construct a revised decision tree. First, fill in the following revised probability tables for the favorable and unfavorable reports. Round joint probability values, P(Favorable), P(Unfavorable), and the posterior probability values to 4 decimals places. Probability Revisions given a Favorable Report State Posterior Probability Prior Conditional Probability of Joint Probability P(State of Nature/Fav.) Probability P(Fav./State of Nature) Nature Strong 0.61 Weak 0.39 P(Favorable) = 1.0000 Probability Revisions given an Unfavorable Report State Prior Conditional Probability Posterior Probability of Joint Probability Probability |P(Unfav./State of Nature) P(State of Nature/Unfav.) Nature Strong 0.61 Weak 0.39 P( Unfavorable) = 1.0000(e) Using the revised probability tables, please identify the revised/posterior probabilities which you are going to use in the revised decision tree: Keep 4 decimal places in the following answers, P( Strong demand | Favorable report ) = P( Weak demand | Favorable report) = P( Strong demad | Unfavorable report) = P( Weak demand | Unfavorable report) =(f) Now you start constructing the revised decision tree. Select the correct sketch of the leftmost part of the revised decision tree based on the information above. OP(F) = 0.588 , P(U) = 0.4186 P(F)-P(Favorable Report) Favorable Report Hire O P(U)=P(Unfavorable Report) Unfavorable Report Residential Towers Q Do not In Do not hire branch hire use EMV of the optimal decision alternative or P(F)-P(Favorable Report) Include the whole Favorable Report decision tree from the Simple Decision Tree part of the solution. Hire P(U)=P(Unfavorable Report) Unfavorable Report Mid-Rise Condos O Do not hire P(F)-P(Favorable Report) Favorable Report Hire O P(U)=P(Unfavorable Report) Unfavorable Report Bungalow Complex O Do not hireOP(F) = 0.5997 , P(U) = 0.4003 P(F)=P( Favorable Report) Favorable Report The probabilities P(F) Hire O and P(U) are calculated P(U)=P( Unfavorable Report) Unfavorable Report using the revised probability tables. Use EMV of the optimal decision Do not hire alternative or include the whole decision tree from the Simple Decision Tree part of the solution.(h) Based on the revised decision tree formulate the optimal decision policy. Note that in each key word you have to use the scroll-down menu to select the correct option. If you recommend not hiring KRG, please select N/A in case of favorable/unfavorable report. Select an answer v Kanonhsa Research Group. If their report is favorable, then choose the Select an answer V project. If the report is unfavorable, then go ahead with the Select an answer V project