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
d. Hurwicz (a =.3)

  • CreatedJuly 17, 2014
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