Cibuco development company is considering the purchase of a parcel of land for the construction of a small shopping center. In order to build this work Cibuco needs the approval of a rezoning of the property by the people Tropicotamia. The sale price of the land is $ 300,000 and the construction of the project would require a total investment of $ 600,000. Once constructed the work, Cibuco could sell the project at $ 1,360,000.
Expenses related to the proposed rezoning of the property amount to $ 40,000 and it is anticipated that the probability of it being tested is only 40%. This process takes approximately 8-9 weeks. If the rezoning is not approved Cibuco will be forced to sell the price, and achieve a net income of only $ 260,000. Cibuco also has the option to acquire an option to purchase 90 days in the amount $ 20,000. During that time he may submit the rezoning application and wait for the decision of Tropicotamia before deciding whether to purchase the land. This sum will not be reimbursed whether or not purchase the property.
Cibuco also has the option to contract by $ 5,000 times a planner you can study the situation and express an opinion about the potential rezoning approval. The consultant could predict that the rezoning be approved or can predict that the rezoning will not be approved. Based on past experience consultant, Cibuco has predicted the following conditional probabilities:
Pr (Consultant predicts rezoning approval | rezoning were approved) = 0.70
Pr (NO Consultant predicts rezoning approval | rezoning is not approved) = 0.80
A. Do nothing.
B. Buy the ground and move forward with the application for rezoning
C. Adquirir an option to purchase, make application for rezoning and wait Tropicotamia not decide whether to approve the rezoning before deciding whether to buy or not buy the property.
D. Recruit planner and hope that he makes his before deciding whether to purchase the property report.
Analyze this situation and Caribbean Development surrender to a report in the professional quality you submit a recommendation based on its findings properly is essential to calculate all the probabilities required for analysis and to include clear in his report. Include in its report a tree diagram that reflects all the possibilities that reflects all the possibilities of each positional route.