Marley is interested in making an offer that maximizes the value he obtains from purchasing the home. If he were to purchase it for $610,000, then the value he would obtain is: $700,000 (what it is worth to him) - $610,000 (what he paid for it) = $90,000. If he were not to purchase it, then the value he would obtain is simply $0. Marley cannot afford to buy the home in cash and needs a bank loan. Fortunately, the seller is indifferent between whether an offer is cash or a bank loan and will simply accept the highest offer greater than or equal to $550,000.

Marley and his agent are considering three possible offers: $550,000, $610,000, and $661,000. Draw a decision tree for the problem they face and solve it. Think carefully about how you can simplify the tree to save time. Which offer maximizes the value Marley obtains?