A real estate developer has the option to purchase a tract of land near a proposed ‘supermall’ location. Her vision is to design a ‘planned’ community that integrates the neighborhood with the shopping and recreational opportunities of the new mall.
* Statistically, the probability of the mall project materializing [probability of success] is estimated at 0.90
• The developer must pay $300K per acre for the 100-acre tract
What is the developer’s risk cost if she proceeds immediately to purchase the tract of property?
A. $1.4M
B. $1.0M
C. $0.4M
D. $2.0M
E. $3.0M