Decision tree analysis
A property developer has purchased half acre of land (2023.43m2), that costed him Aus. $1.1m. in Tarniet area (western Melbourne suburb).
The developer has three different plans to take a decision which could fetch him the high rate of returns.
As of to construct the units the cost is going up to $150k/unit. For constructing 10 units the cost is rising up to $1.5m. Thus the decision is to be made whether
To sell the land as is after 6 months, as the value will be increased by 6% over the time period.
Or
To make further investment by developing the land and selling as the whole residential units which could make more payoffs over time?
Or
To develop three types of residential units that is for high income group, medium income group and low income group and give them for rent/lease later on.
Take some necessary assumptions and use Decision Tree Analysis to solve this problem: