A real estate investor has the opportunity to purchase land currently zoned residential. If the county board approves a request to rezone the property as commercial within the next year, the investor will be able to lease the land to a large discount firm that wants to open a new store on the property. However, if the zoning change is not approved, the investor will have to sell the property at a loss. Profits (in thousands of dollars) are shown in the following payoff table:

	rezoning approve	rezoning not approve
decision alternative	s1	s2
purchase d1	640	-200
do not purchase d2	0	0

If the option will cost the investor an additional $40,000, should the investor purchase the option?

Yes

Why or why not?

What is the maximum that the investor should be willing to pay for the option?

Answer rating: 100% (QA)

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