The Bill Galen Development Company (861:11rs considering the purchase and commercial development of a piece of property. The property is now zoned residential; BGD heeds a variance from the city in Order to do commercial development on a property. The asking price for the property is a firm $300.00 BGD estimates it can construct a shopping center for an additional $500.000 and sell the completed center for approximately $950000.

A variance application costs $30,000 in fees and expenses, and there is only a 40% chance that the variance will be approved. Regardless of the outcome. the variance process takes two months If BGD purchases the properly and the variance is denied, the company will sell the property and receive net proceeds of $260,000 BGD can also purchase a three-month option on the property for $20.000, which would allow time for Ito apply for the variance. Finally, for $5,000 an urban planning consultant can be hired to study the situation and render an opinion as to whether the variance will be approved or denied. The city council has been reluctant to grant variances, so there is a 60% probability the consultant will predict denial of the variance. A friend of Bill, a professor at the local university, estimates the following Conditional probabilities for the consultant’s opinion:

P(consultant predicts approval I approval granted) = .70

P(consultant predict s denial I approval denied) = .80

BGD has contracted with you to determine / recommend the optimal strategy regarding this parcel of property. Since you are familiar with how to use decision trees to solve problem, prepare a report that will help BGD make their decision in this situation. Your report should be addressed to Bill Galen, President, Bill Galen Development Company.

Utilize the quantitative analysis approach in your report as follows:

1. Defining the problem: Describe what the problem entails.

4. Solve the problem using the decision tree developed in Step 2.

c. What strategy do you recommend and why?

5. Testing the solution: Ekes the derision tree produce results that are accurate and complete

6. Analyzing the results: What does the information you prepared in Steps 1.5 tell you about the decision situation?

7. Implementing the results: How would you implement the results?

Answer rating: 100% (QA)

1 Define the problem The company BGD considering for the purchase and commercial development of a piece of property The property is now in residential ... View the full answer