Norman Ryerson makes a living by renovating 19thcentury buildings and leasing them to microbrewers,which he has found to be a particularly profitable type of income-producing property. Having no equityinvestments at the moment, Ryerson is searching Toronto's Port Lands for a new project. He discoversa suitable building at the intersection of Cherry and Polson Streets and is contemplating its purchase,for a current price of $9, 000, 000.00. If he does, he will also, on the day of sale, pay his favorite generalcontractor an additional 1, 000, 000.00 to completely renovate the property. Since he will do so, he would have a 100% equity interest in the building and no mortgage debt. Norman strongly believes, with aninety percent likelihood, that he will earn a 20% return on his total investment by the end of one year from purchase. He does entertain the possibility that he would earn less than that, or even wind up with a worthless building at the end of the year. His thinking somewhat muddled by a day spent in the nearby Polson Street Pub, he finds that he cannot precisely forecast what the probabilities wouldbe of all the possible returns less than his desired 20%, so being a highly prudent (risk-averse) investorhe decides to act as if the worst-case scenario is the sole alternative, placing the residual probability onthe outcome that he will lose his entire investment. Making his decision to invest or not invest on thisbasis, he forecasts the end-of-year mean value, in dollars, of proceeding with the investment and, based on his current wealth, his personal financial welfare if he does proceed.

a. What does he calculate for this mean value?

b. What is Norman's expected rate of return from the investment?

c. If Norman could sell a futures contract to some other investor for the year-end mean value of the project, would he be better or worse off by doing that or just proceeding with his risky investment?