that the best use of this land is to build condominiums Our first decision involves the scale of our investment. The size of the lot dictates that we can build three units per floor and our issue is whether to build a two-or three-story building. A two-story building would have six units and would cost $80,000 per unit to build. A three-story building would have nine units and would cost $90,000 per unit to build. Cost per unit increases as the building gets taller, largely because of additional foundation and elevator costs. We will assume that fully rented condos just break even on a cash flow basis so that they earn their entire return through expected capital gains Our second decision involves timing. The current value of a one-unit condominium is S100,000, but the housing market is volatile. We assume that, with equal likelihood, the price of a condominium in one year will be either $150,000 or $90,000. The risk-free rate of interest is 10% and 0. that the best use of this land is to build condominiums Our first decision involves the scale of our investment. The size of the lot dictates that we can build three units per floor and our issue is whether to build a two-or three-story building. A two-story building would have six units and would cost $80,000 per unit to build. A three-story building would have nine units and would cost $90,000 per unit to build. Cost per unit increases as the building gets taller, largely because of additional foundation and elevator costs. We will assume that fully rented condos just break even on a cash flow basis so that they earn their entire return through expected capital gains Our second decision involves timing. The current value of a one-unit condominium is S100,000, but the housing market is volatile. We assume that, with equal likelihood, the price of a condominium in one year will be either $150,000 or $90,000. The risk-free rate of interest is 10% and 0