Assignment 2: Case Problem Real Estate Development Select a New Project Problem Description A real estate company is cons dering the development of one of the folowing thres possible projects: (1) an apartment building: 12) an office ouilding: (3) a warehouse. The amount of payoff protit that could be earned loy saling the estate depends on the economic condrions specified as optimistic, realistic and pessimist. The esumated payofts and probabilities under optimiste, realistic and pessimistic conditions are shown as folows. Alternatives States of Nature Optimistic Conditions Realistic Conditions Pessimistic Conditions Apartment Buildin A ? C Office Auilding D D F F Warchouse G H 1 Probability y Z in preparation for a final decision, the company is considering the hinng of a business analyst. If the company hires the analyst, the decison regardng which project to develop will not be made unt the analyst presents a survey. However, the analysts requesting an uptrent peyment Ion Le Survey in the annount of the probabiles of the survey results lu le positive ur regalive are indk Summary tables, in case the company hires a business analyst Fee for Survey Z Z Prohability of survey results positive i Probablity of survey results negative k (1) If the survey results are positive Alternatives Optimistic Conditions A-Z Apartment Building Otice Bulding Warren States of Nature Realistic Conditions BZ E.Z H7 Pessimistic Conditions C-Z F.Z D-2 G-7 1-Z d . Probability (2) If the survey results are negative Alternatives Optimistic Conditions A-Z States of Nature Realistic Conditions B-Z EZ Apxatireni Balding Office Building Warehouse Probability Pessimistic Conditions 6-2 F.Z 1-Z D-Z G-2 H-2 h Grading Points Per Assignment 2: Starting Conditions Each student will rece ve from the structor an excel te woh a diferent dataset for payotts (A to l) and probabilites xy.zikde.th.n). You have to prepare and submit a managerial report where you should answer the question: Which one of the development projects should be selected? And based on your esimales, should the company hre the business analyst? Content per Tasks Tasks Assignment * at 10 Task 2-0 Sturgents should structure and present their Assignment in the form of a Managerial Repxart. The pated kingth of the main bexty (task: 2-1 to 2 4) is up to 3 pags APA format educing cour page tablc of content cxccutic summary task 2-5) and appendices (screenshots of the Payoff Table EMV Table Sensitivity Analysis Diagram. TreePlan Diagram of the Doosion Treel. Submiss on recuirements: Managenal Report/word file and excel te with completed worksheets (1) to). 1 Task 2-1 Prepare payoff tables and develop a decision tree for this problem without probabilmes and EMVS). 2 Task 2-2 Given the probability of all three coonomic conditions and using expected monctary values (EMS) calculate EMVs for each node and answer the questions (1) What's the EMV for not hiring a business analyst and the EMV tor hinng a business analyst? (2) What is your recommendation to hire or not to hire a busness analyst? 2 Task 2-3 2 Use sensitivity analysis to define the probability renge with respect to the survey results which might allect the decision to hire or rullu hire a business analyst, draw the sensitivity Charl, and find the partxatility for the con Apply e software tool for the constructon of a decision tree with payotts, probabilities, and EMVs. The recommenceci volis TreePlanta Microsoft Excel Add-Irislil is prensialled u al V-Posul the MET V- LAE) Task 2-4 2 Task 2-5 Prepare an executive summary 1 0 List of Worksheets in the Excel File (it should be used as a reference for different tasks of the managerial report) A2 TXI Paytiff Tale Template Payoff Table Solution and a scotch of a sin tree (without prctatiity and EMVS) --> Needed for Task 2-1 EMV Calculation: use EMV as a decision critenon for each decision nodes and states of nature nodes calculate the EMV for each node, and recommend whether to hreot to hire a busness analyst --> Needed for Task 2-2 Sensitivity Analysis Diagram: comoute the probability of survey results and define the range of probability values that the real estate company would hire or not hire a business analyst including the probablity of the cross pont) --> Needed for Task 2-3 (M) Treellan Diagram of the Decision Tree use BU MET V-LAB for Excel Add-In TreePlan --> Needed for Task 2-4 Alternatives Apartment Building Office Building Warehouse Probability Optimistic Conditions 270000 200000 210000 0.2 Realistic Conditions Pessimistic Conditions 220000 -250000 80000 - 130000 130000 - 100000 0.68 0.12 Fee for Survey Probability of survey results positive Probability of survey results negative 7000 0.59 0.41 If the analysis report results positive probability Optimistic Conditions 0.63 Realistic Conditions 0.25 Pessimistic Conditions 0.12 If the analysis report results negative probability Optimistic Conditions 0.15 Realistic Conditions 0.31 Pessimistic Conditions 0.54 1. If the company does not hire a business analyst: Alternatives States of Nature Realistic Conditions EMV Node Optimistic Conditions Pessimistic Conditions Apartment Building Office Building Warehouse Probability 2. If the company hires a business analyst: Fee for Survey 2.1 If the analysis report is positive: Alternatives States of Nature Realistic Conditions EMV Node Optimistic Conditions Pessimistic Conditions Apartment Building Office Building Warehouse Probability 2.2 If the analysis report is negative: Alternatives States of Nature Realistic Conditions EMV Node Optimistic Conditions Pessimistic Conditions Apartment Building Office Building Warehouse Probability 3. Final Solution 3.1 EMV (hire a business analyst) Probability of report results positive Probability of report results negative Node EMV (Report results positive) EMV (Report results negative) EMV (Hire a business analyst) Node 3.2 Final EMV EMV (Hire a business analyst) EMV (Do not hire a business analyst) Final EMV (Hire/Do not hire business analyst)