Interest Rate Project Decline Stable Increase Office park Office building $0.5 1.5 1.7 $1.7 $4.5 1.9 2.5 Warehouse 1.4 1.0 Mall 0.7 2.4 3.6 Condominiums 3.2 1.5 0.6
Place-Plus, a real estate development firm, is considering several alternative development projects.
These include building and leasing an office park, purchasing a parcel of land and building
an office building to rent, buying and leasing a warehouse, building a strip mall, and building
and selling condominiums. The financial success of these projects depends on interest rate
movement in the next 5 years. The various development projects and their 5-year financial return
(in $1,000,000s) given that interest rates will decline, remain stable, or increase, are shown
in the following payoff table: Determine the best investment, using the following decision criteria.
a. Maximax
b. Maximin
c. Equal likelihood
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 6 images
