You take a position with a large real estate development company. Your first big

Question

You take a position with a large real estate development company. Your first big assignment is to sell an office building – you have been informed the company’s cost into the building (and the bottom line price it is willing to accept) is $400,000. You have identified a likely buyer and you assess that his top price is either $500,000 with a probability of .3, $600,000 with a probability of .5, or $1,000,000 with a probability of .2. You have to commit to a posted price – determine what price will maximize your profitability? Explain your reasoning and provide evidence that supports your answer

Explanation / Answer

Hi,

The probablity would be

Maximized at the following price

0.3*500000+0.5*600000+0.2*1000000

$650000

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