Determine the best investment

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Landloc, a real estate development firm, is considering several alter- native development projects. These include building and leasing an office building, purchasing a parcel of land and building a parking lot, buying and leasing a warehouse, building a shopping mall, and building and selling condominiums. The financial success of these projects depends on interest rate movement in the next five years. The various development projects and their five-year financial return ($ millions) 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 d. Hurwicz (0.3)


Interest Rates



Project 

Decline 

Stable 

Increase

Office building

.5

1.7

4.5

Parking lot

1.5

1.9

2.4

Warehouse

1.7

1.4

1.0

Shopping mall

.7

2.4

3.6

Condominiums

3.2

1.5

.6

Reference no: EM131121649

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