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You own a piece of raw land in an up-and-coming area in Gotham City. The costs to construct a building increase disproportionately with the size of the building. A building of q square feet costs 0.1q2 to build. After you construct a building on the lot, it will last forever, but you are committed to it: You cannot put another building on the lot. Buildings currently rent at $98 per square foot per month. Rents in this area are expected to increase in five years. There is a 53% chance that they will rise to $197 per square foot per month and stay there forever and a 47% chance that they will stay at $98 per square foot per month forever. The cost of capital is fixed at 11.6% per year. a. Should you construct a building on the lot right away? If so, how large should the building be? b. If you choose to delay the decision, how large a building will you construct in each possible state in five years? a. Should you construct a bulding on the lot right away? If so, how large should the building be? If you choose to delay the decision, how large a building should you construct in the $197/ sq. ft. state in five years? It should be sq. ft. (Round to a whole number.) If you choose to delay the decision, how large a building should you construct in the $98/sq, f. state in five years? It should be sq. ff. (Round to a whole number.) If you wait, what is the expected value of the bulding today? The expected value is $ million. (Round to two decimal places.) b. If you choose to delay the decision, how large a building will you construct in each possible state in five years? If you build today, how large a building should you construct? It should be sq. ff. (Round to a whole number.)

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