Builds depends on approval of zoning requests

Assignment Help Operation Management

Reference no: EM132108090

A builder has located a piece of property that she would like to buy and eventually build on. The land is currently zoned for four homes per acre, but she is planning to request new zoning. What she builds depends on approval of zoning requests and your analysis of this problem to advise her. With her input and your help, the decision process has been reduced to the following costs, alternatives, and probabilities:

Cost of land: $2 million.

Probability of rezoning: .60.

If the land is rezoned, there will be additional costs for new roads, lighting, and so on, of $1 million.

• If the land is rezoned, the contractor must decide whether to build a shopping center or 1,500 apartments that the tentative plan shows would be possible.

• If she builds a shopping center, there is a 70 percent chance that she can sell the shopping center to a large department store chain for which excludes the land; and there is a 30 percent chance that she can sell it to an insurance company for $5 million over her construction cost (also excluding the land).

• If, instead of the shopping center, she decides to build the 1,500 apartments, she places probabilities on the profits as follows:

• There is a 60 percent chance that she can sell the apartments to a real estate investment corporation for $3,000 each over her construction cost; there is a 40 percent chance that she can get only $2,000 each over her construction cost. (Both exclude the land cost.)

• If the land is not rezoned, she will comply with the existing zoning restrictions and simply build 600 homes, on which she expects to make $4,000 over the construction cost on each one (excluding the cost of land).

Draw a decision tree of the problem and determine the best solution and the expected net profit.

Reference no: EM132108090

Questions Cloud

Continuous quality improvement methods : Compare and contrast the following continuous quality improvement methods: Six Sigma, Lean, and PDCA.

Produces orange juice from three different grades of oranges : McOrange Inc. produces orange juice from three different grades of oranges. Oranges are graded 1(poor), 2 (medium), 3 (good) depending on their quality.

What is the interaction between policy and implementation : What is the general purpose of the manual What is the interaction between policy and implementation

Important role in the globalization process : While many domestic institutions play an important role in the globalization process,

Builds depends on approval of zoning requests : What she builds depends on approval of zoning requests and your analysis of this problem to advise her.

Explain the workflow in your own words : Explain the workflow in your own words in a Word document. Then compare and contrast the differences in the workflow without EHR and with EHR.

What is the capacity of the employee : What is the capacity (in customers per hour) of the employee?

What is the process capacity in patients per hour : Patients are arriving at a clinic at a rate of two per minute. What is the process capacity in patients per hour?

Discuss the firm values and reflect the corporate culture : What seem to be the key focal points of the code of ethics? Does the code discuss the firm's values and reflect the corporate culture? How?

User Account

All Pages