Question

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: State of Nature Rezoning Approved Rezoning Not Approved Decision Alternative S1 S2 Purchase, d1 610 -190 Do not purchase, d2 0 0 If the probability that the rezoning will be approved is 0.5. What is the EVSI? Round your answer to three decimal places. Why or why not?

          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:
State of Nature
Rezoning Approved
Rezoning Not Approved
Decision Alternative
S1
S2
Purchase, d1
610
-190
Do not purchase, d2
0
0
If the probability that the rezoning will be approved is 0.5.
What is the EVSI? Round your answer to three decimal places. Why or
why not?

Added by Carol M.

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