You have just bought a run-down house in a historic presentation district for $220,000. You plan to renovate it, after which you believe you can sell it for $450,000. There are two different ways you can perform the renovation, Plan A and Plan B. Plan A would cost $125,000 and take three months. Plan B would cost $85,000 and take four months; however, Plan B requires approval by the historic preservation board. It will take the board two months to consider the proposal for Plan B and you believe the chance of the proposal being approved are 70%. Each month you hold the property costs you $1,500 in financing costs and property taxes. You are considering three options: Pursue plan A immediately Submit plan B for approval to the preservation board and wait for their decision. If they approve plan B, pursue plan B; otherwise pursue plan A. Submit plan B for approval but start work on it immediately. If the plan is not approved, you will have to backtrack after two months and pursue plan A instead. This will result in a total construction costs of $145,000 and a total construction time of 5 months.

Assuming that you are using the EMV (expected mean value) criterion to make your decisions, which option should you pursue? Use a decision tree and show your work.