TransLink has announced the Canada Line will be extended to Steveston. The train will take one of two routes No. 3 Road or Garden City. You have an opportunity to purchase some property on each of the routes. The purchase price of the No. 3 Road property is $2,700,000. If the Canada Line is built on No. 3 Road the property will be worth $4,500,000. If the Canada Line is not built on No. 3 Road it will be worth $900,000. You may purchase the property on Garden City for $1,800,000. If the Canada Line is built on that route your property will be worth $3,500,000 and if it is not built on Garden City your property will be worth $600,000. There is a 60% chance that No. 3 Road will be selected and a 40% chance the Garden City route will be chosen. Calculate the expected profit (or loss) for each alternative. Which property should you buy?

Answer rating: 100% (QA)

Solution To calculate the expected profit or loss for each alternative we need to calculate the prob... View the full answer