The document provides information about a land parcel purchased for $20,000 that may be rezoned. There is a 30% chance it will be rezoned for commercial use and sell for $50,000, a 50% chance it will be rezoned for residential use and sell for $30,000, or a 20% chance it will not be rezoned. Mr. Hi Roller has offered $30,000 for the land now. Using the Delphi procedure and decision tree analysis, the expected value of keeping the land is calculated to determine if selling to Mr. Hi Roller or keeping the land is the better option.

1. Exam 3 Corrections (Explain briefly why the red “highlighted
answer is right 14 questions)
1) The currency of Venadia, a country, falls sharply in value
against the currency of Lutetia, a neighboring country. Which of
the following is a consequence of this exchange rate
movement?
A. Lutetia's products will achieve a competitive pricing in
Venadia.
B. Venadia's exports to Lutetia will increase because
Venadian goods will become cheaper in Lutetia.
C. Venadia's products will cost more in Lutetia.
D. There will be no difference in the volume or direction of
trade.
E. Lutetia's exports to Venadia will increase because Lutetian
goods will become cheaper in Venadia.
2) The euro/dollar exchange rate is €1 = $1.20. If a trader buys
a camera that retails for $300 in New York and sells it for
€200 in Berlin (ignoring transaction costs, transportation costs,
or trade barriers), this represents a potential profit (arbitrage) of
_____.
A. $60
B. $80
C. $20
D. $100
E. $40
3) The nominal interest rate is 9 percent in Brazil and 6 percent
in Japan. Applying the international Fisher effect, the Brazilian
real should:
A. appreciate by 3 percent against the Japanese yen.
B. depreciate by 3 percent against the Japanese yen.
C. appreciate by 1.5 percent against the Japanese yen.
D. depreciate by 1.5 percent against the Japanese yen.

2. E. appreciate by 15 percent against the Japanese yen.
4) The government of Beryllia tightly controls the ability of its
residents to convert its currency into other currencies. However,
all foreign businesses with deposits in banks of Beryllia may, at
any time, convert all their currency into foreign currency and
take them out of the country. Beryllia's currency is said to be
_____.
A. leading
B. nonconvertible
C. externally convertible
D. freely convertible
E. lagging
5) Certovia and Norkland are two neighboring countries that
actively trade goods and services with each other. Under the
gold standard, there will be a net flow of gold from Norkland to
Certovia when:
A. Certovia is in trade deficit with Norkland.
B. Norkland is in balance-of-trade equilibrium with Certovia.
C. Certovia is in trade surplus with Norkland.
D. Certovia imports more than it exports to Norkland.
E. Norkland’s balance of payment to Certovia is favorable.
6) Which of the following statements is true about the role of
the International Monetary Fund?
A. It never interfered in the monetary and fiscal conditions of
its member countries.
B. It was authorized to approve currency devaluations of only
up to 10 percent.
C.It required member countries to adhere to specific agreements
irrespective of the amount of funds the countries borrowed
D.It lent money under the International Bank for Reconstruction
and Development (IBRD) scheme and a second scheme which is
overseen by the International Development Association
(IDA).
E. It helped deficit-laden countries bring down inflation rates
by providing short-term foreign currency loans.
7) Which of the following is an argument for a floating

3. exchange rate system?
A. Each country should be allowed to choose its own inflation
rate.
B. Speculation in exchange rates dampens the growth of
international trade and investment.
C. Unpredictability of exchange rate movements makes business
planning difficult.
D. Removal of the obligation to maintain exchange rate parity
destroys a government's monetary control.
E. Trade deficits can be determined by the balance between
savings and investment in a country, not by the external value
of its currency.
8) All International Monetary Fund (IMF) loan packages come
with conditions attached. Which of the following is prevented
due to these policies of the IMF?
A. Trade liberalization
B. Elimination of restrictive import licensing
C. Excessive government spending and debt
D. Privatization of state-owned assets
E. Deregulation of the economy to increase competition
9) Which of the following statements is true about the current
monetary system?
A.Use of instruments such as the forward market and swaps has
decreased since the breakdown of the
Bretton Woods system.
B.The present monetary system lacks the volatile movements in
exchange rates that existed in a fixed
exchange rate system.
C. The current foreign exchange market works exactly as
depicted in the purchasing power parity theory.
D. Instruments such as the forward market and swaps increase
the foreign exchange risk a company faces.
E. A combination of government intervention and speculative
activity drives the current foreign exchange market.
10) A company can increase its growth rate by taking goods or
services developed at home and selling them internationally.

4. The returns from such a strategy are likely to be greater if:
A. the product is already being offered by local companies in
the nations that the company enters.
B. the product is a generic product that requires little
differentiation.
C. indigenous competitors in the nations that the company
enters lack comparable products.
D. there is a high inflation in the nations that the company
enters.
E. the product is perceived to be very costly in the home
country of the company.
11) Why do companies find it strategically challenging to deal
with high pressures for both, cost reductions and local
responsiveness?
A. Cost reductions are inversely proportional to
standardization.
B. Being locally responsive tends to raise costs.
C. Cost reductions negatively impact maximization of single-
plant utilization.
D. As the quantity produced goes on increasing, it becomes
more difficult for a company to achieve
economies of scale.
E. Customer tastes are usually identical across global markets.
12) Which of the following conditions is most favorable to reap
gains from global scale economies?
A. Low demand for local responsiveness
B. High pressures for cost reduction
C. Lack of universal needs
D. National differences in accepted business practices
E. High pressure to delegate production to domestic
subsidiaries
13) Which of the following is a reason why a relatively poor
country may be an attractive target for inward investment?
A. Rapid economic growth
B. Political instability
C. Currency depreciation

5. D. High cost of living
E. Less developed infrastructure
14) Which of the following is an advantage of licensing as a
mode of entry into foreign markets?
A. It helps a firm to realize substantial experience curve and
location economies.
B. It gives the firm tight control over manufacturing, marketing,
and strategy.
C. The licensor does not have to bear the development costs
and risks associated with opening a foreign market.
D. Firms can easily maintain control over how their
technological know-how is used by a licensee.
E. Licensing allows a foreign firm to use profits earned in one
country to support competitive attacks in another.

6. Case Assignment:
All land within the municipality of Springfield is zoned for
either agriculture, residential, or commercial use. You have just
purchased a parcel of agriculture land for $20,000 in the
expectation that it will be rezoned next year. But the rezoning is
controversial, and will be decided by the City Council rather
than just the Zoning Commission.
According to your inside sources, there’s a 30% chance that the
land will be rezoned for commercial use; in that event, you will
be able to sell the land for $50,000. But the populists on the
Council are pushing for more affordable housing; if they win
the vote, which your sources think the likelihood is 50%, then
the land will be rezoned for residential use, and you will only
be able to sell the land for $30,000. Of course, the Greens may
win, and the land won’t be rezoned at all. In that event, it will
still be worth what you paid for it, but nothing more than that.
Mr. Hi Roller has just approached you. He is a land speculator
like yourself, but does not have the inside sources that you do.
He thinks that the land will be rezoned next year, and has
offered $30,000 cash for it right now.
Which alternative should you choose? Explain your decision
process in detail showing the equation and the process
1. Read about the Delphi Procedure
2. The subject is not about flipping real estate
3. Provide the mathematical solution to the answer that I
provided below
My answer is listed below, but I need the mathematical equation
using the Delphi Procedure.

7. Research Material:
Module 2 - Home
Decision trees and the Delphi Procedure
Modular Learning Outcomes
Upon successful completion of this module, the student will be
able to satisfy the following outcomes:
· Case
· Calculate the expected value of an outcome, given its nominal
value and probability of occurrence.
· Summarize data bearing on a quantitative decision.
· Represent the decision-making process as a decision tree.
Module Overview
Decision Trees
Decision trees are a common topic in the curriculum. Searching
the Web for “decision tree” will produce hundreds of hits, most
of them on the websites of undergraduate business programs.
“Real” references, in the form of books and book chapters, are
harder to identify, since the topic tends to be immersed in
massive tracts that span the entire range of decision making (but
see the Background Info page for two of them, listed as
Additional Sources.)
Decision trees are presented in many different ways, with
different degrees of elaboration. The following is the “Trident
decision tree model.” It may appear unnecessarily complex, and
for simple trees, it definitely is. But as the decision itself
become more complex, the multiple features of the model
become more useful.
The various parts of the model are shown below. At first
glance, it may all look a bit confusing. Don’t worry. The
confusion will go away as we examine a series of examples.
We start on the left, with a decision that must be made. Each
decision has one or more alternatives. Each alternative has a

8. cost.
Each alternative has one or more possible outcomes. Associated
with each outcome is a value (also called a “payoff”), which is
the benefit obtained if that particular outcome is realized. Also
associated with each outcome is a probability, which ranges
between 1.00 (if the outcome is certain) and 0.00 (it it’s
impossible). If there’s more than one possible outcome, then
the sum of the probabilities must equal 1.00. (That’s because
there’s always an outcome of some kind.)
The expected value of each outcome is its value multiplied by
its probability. The value of the alternative is the sum of the
expected values of all the outcomes.
The endpoint for the evaluation of each alternative is the net
value, which is the expected value of the alternative, minus its
cost.
The calculations are repeated for each alternative. The
alternative yielding the greatest net value (either greatest gain
or smallest loss) is the decision maker’s preferred choice.
As an additional feature, the diagram shows two different types
of connectors. Logical connections are in black, numerical
connections are in red. For example, writing down an
alternative logically implies the existence of a cost associated
with that alternative. However, the mere existence of an
alternative does not, in itself, determine the amount of that
cost. For that reason, the line connecting the alternative and its
cost is black On the other hand, the alternative cost is needed
to calculate the net value of the alternative, on the far right; for
that reason, the line connecting these two entities is red.
Let’s look at some worked-out examples.
Type I. The first “decision” isn’t really a decision. There’s
only one alternative, and it’s forced upon the decision maker.
A father, under pressure from his children, “chooses” to buy an
AKC Springer spaniel at a cost of $1000. During its
reproductive lifetime, however, the dog whelps eight puppies,
which are sold for an average of $1200 each ($9600 total).
What was the “value” of that “choice?”

9. Cost of alternative: $1000
Value of outcome: $9600
Probability of outcome (not shown): 1.00. (Since it happened,
it’s probability is 100%!)
Diagram (x, + and – signs removed, to reduce the clutter)
Net value: $8600
Type II. There are two or more alternatives. The outcomes are
known with certainty (probability 1.00) for each, as are the
costs and expected values.
A professional photographer has been offered two contracts, and
only has the time to take one of them. Both contracts would
require him to lease special equipment. Contract A, which
would run for one year, pays $10,000, but requires the lease of a
SteadiCam for $3,000. Contract B, which would run for two
years, pays $3,500 per year (total value $7,000), but required
the lease of a an HD three-dimensional still camera for $800 per
year (total cost $1,600). What’s the best choice?
Summary of data:
Contract A
Contract B
Value
10,000
7,000
Cost
3,000
1,600
Net Value
7,000
5,400
Diagram (numbers in thousands):
Type III. There is only one alternative, but that alternative has
several possible outcomes. Each outcome has a probability that

10. it will occur. The list of outcomes must consist of all possible
outcomes, and the sum of the probabilities must be 1.00. (100%)
A father needs to buy a puppy for his children (there’s no
alternative). The usual price for an AKC Springer Spaniel is
$2500, but a breeder offers him a puppy -- breeder’s choice --
from a litter due to be whelped in one month, at a discount price
of $500 cash. The father asks the reason for the discount.
“Well, genetic testing has determined that the sire has a
congenital heart condition, and there’s a 50% chance a puppy
will have it. There’s no test for it until the dog is an adult. The
condition may shorten the lifespan. A dog that has it shouldn’t
be bred, and is only worth $200 has a family pet. If a dog
doesn’t have it, then it’s worth more; a breeding male, $2000; a
breeding female, $3000. “
“So let me understand,” the buyer said. “If I buy the puppy
right now for $500, and it’s born male without the heart
condition, I can turn around and sell it immediately for $2000?
And if it’s a female, for $3000? Why don’t you just wait
yourself, and see how the litter turns out?”
“Because I’m risk-adverse,” the breeder says. “And on top of
that, I need $500 cash today, to pay my kid’s orthodontist.”
Flashback to stats: The probability of male vs. female is 0.50.
The probability of healthy vs. defective heart is 0.50. Since the
outcomes are unrelated, the joint probabilities are 0.25.
What’s the net value of buying the dog? Summary of data:
Alternatives
Outcomes
Value of alternatives
Name
Cost
Name
Value (V)
Prob (P)
VxP
Total (sum of VxP)
Net

11. Buy dog
500
Defect
(M or F)
200
0.50
100
1350
850
Healthy (M)
2000
0.25
500
Healthy (F)
3000
0.25
750
Since the net value of the deal is positive ($850), the buyer
should snatch up the deal. And also ask the breeder if he has
anything else he’d like to sell!
Type IV : Multiple alternatives, multiple outcomes per
alternative. For each alternative, the list of possible outcomes
must include all possible outcomes. For each alternative, the
sum of the probabilities associated with the outcomes must be
1.00 (100%).
Mr. Entre is interested in selling his business. He has two
possible buyers, A and B. Both of them would require some

12. capital improvements before they buy; either updating the store
fronts, or updating the IT system. Mr. Entre is inclined to do
one or the other, but not both.
The store upgrade would cost $6M, the IT upgrade $3.5M. If
the store is upgraded, there’s a 20% chance that A would buy,
paying $9M. There’s a 50% chance that B would buy, paying
$8M.
If the IT system were upgraded, there’s a 40% chance that A
would buy, for $8M. There’s a 30% chance that B would buy,
for $6M.
The third alternative is to do nothing, and hold onto his
company. What should Entre do?
Summary of data (Costs/values in millions of $):
Alternatives
Outcomes
Value of alternatives
Name
Cost
Name
Value (V)
Prob (P)
VxP
Total (sum of VxP)
Net
Update store
6
Buyer A
9
.2
1.8
5.8
-0.2
Buyer B
8

13. .5
4.0
No sale
0
.3
0
Update IT
3.5
Buyer A
8
.4
3.2
5.0
1.5
Buyer B
6
.3
1.8
No sale
0
.3
0

14. Do nothing
0
Buyer A
0
0
0
Buyer B
0
No sale
0
Here’s the outline of the decision tree. By now, the reader
should be able to fill in the data. The “Do nothing” alternative,
which has zero values from left to right, has been omitted.
As seen above, the preferred alternative is to update the IT and
hope for a sale.
Summary of types:
I:
One alternative, one outcome (100% probable) per alternative

15. II:
Multiple alternatives, one outcome (100% probable) per
alternative
III. One alternative, multiple outcomes (total 100% probable)
per alternative
IV. Multiple alternatives, multiple outcomes (total 100%
probable) per alternative
There are also mixed types. One type combines alternatives
having probabilistic outcomes with those having known
outcomes. The diagram below illustrates this type. The upper
alternative is probabilistic, the bottom alternative is known.
This is a straightforward combination of Types II and IV,
above, and we won’t bother with an example.
In the second mixed type, the choice of one alternative forces
the consideration of one or more additional alternatives. The
value of the first alternative is included in the calculation of the
sub sequent alternatives, as indicated by the green lines in the
figure below.
In step 1, the decision maker must choose between alternatives
1 and 4. (The numbering is arbitrary).If alternative 1 is
selected, then it has a net value; but the decision-maker is
forced into an additional choice between alternatives 2 and 3.
Each has a net value, which is calculated as before, but now

16. includes the net value of alternative 1. The decision maker then
chooses between the net values of alternative 1 followed by 2
(1,2), alternative 1 followed by 3 (1,3), or the net value of
alternative 4.
Here’s an example that corresponds to the model.
Mr. Digit, a company CIO, decides he must upgrade its database
software. His geeks offer him the choice between DB1 and
DBX. (All dollar amounts are lease prices, per year.)
DB1 is a safe, established app costing $1M. The expected and
assured productivity gain from DB1 would be $2M.
DBX is a new, state-of-the-art app costing $1.5M. The
productivity gain is less certain, depending upon how rapidly
the IT people trained. When forced to give estimates, the geeks
estimated a 30% probability of a $4M gain, and a 70%
probability of a $3M gain.
The geeks go on to tell Digit that while DBX is great, its vendor
may not survive an ongoing market shakeout. If Digit chooses
DBX, then he must consider buying a third party support
contract, at a cost of $10,000 ($0.01M). The cost of a
catastrophic crash is expected to be $0.5M, but the support
contract would cover it; the contract would, in effect, have a
value of $0.5M. Without the contract, the company would be
stuck with the $0.5M bill (a “value” of -$0.05). The geeks
estimate a 10% probability of a catastrophic crash.
What should Mr. Digit do?
There are three net-value outcomes, highlighted above. Buy
DB1, buy DBX with a service contract, or buy DBX without a
service contract. The best choice of alternative for Digit
(+1.84M) is to buy DBX with a contract.
When faced with a decision, does the decision-maker actually
have to draw out a tree? That’s a personal preference (although
it may be a mandatory school exercise). But when drawing a
tree, must one include all the special nomenclature shown
above; i.e., the different boxes, colors, colored lines, and the
like?

17. The answer to that question is definitely NO. The diagrams are
only useful as heuristics; that is, they help us organize our
thinking, and make sure we don’t leave anything out. An actual
decision will probably be based on a freehand sketch
Here’s how the database / support decision, just discussed, first
appeared when roughed out by the course developer on an
engineering pad, using black and red Sharpies.
Limitations of decision trees:
The GIGO aphorism has never been more true. The decision
tree approach is only as useful as the initial data are accurate.
It’s safe to assume that Mr. Digit’s experts were reluctant to
give him fixed-point estimates of the various outcomes. In the
real world, who could say with certainty that there’s exactly a
70% chance of earning exactly 3 million dollars? There would,
of course, be a whole range of outcomes, but this particular
approach doesn’t handle ranges; only fixed-point
approximations.
Such approximations may be useful as a starting point. After
all, some data are better than no data, and having some decision
procedure is better than merely guessing. If nothing else,
drawing a decision tree forces one to list and consider all the
outcomes, and the degrees to which they’re known. This is
always a useful first step.
Some additional reading:
As noted at the top of this page, there are many sources on the
Web. One interesting short paper, unfortunately without an
illustration, discusses using a decision tree to make career
choices (Kautt, 2010). Bratvold and Begg (2010) present
decision trees in the context of petroleum exploration and
production. For a more general discussion, see Simon (2000).

18. My Work:
Decision Trees and The Delphi Procedure
After purchasing the tract of land for $20,000 that is
potentially being rezoned the following year, an offer from Mr.
Hi Roller of $30,000 would definitely net an overall increase of
$10,000. This would be an easy decision but with insider
sources, you have a better understanding of how events may
change. By waiting, observing and being patient could possibly
be beneficial in the long run (Kautt). In this case, the expected
benefit from holding off on selling to Mr. Hi Roller, could be
upwards profit of $14,000 overall which is more than what was
offered initially by Mr. Hi Roller
REZONED TO:
PROBABILITY TO BE REZONED
POTENTIAL PROFIT
Commercial Rezoning
30%
$30000
Residential Rezoning
50%
$10000
Agricultural Rezoning
20%
$0
Expected to Benefit: $14,000

19. Through this procedure, you can surmise that there is a higher
probability to make a monetary gain. With the higher odds at
50% that the tract be rezoned for residential purposes, you will
still have potential to get what Mr. Hi Roller is offering. Yet,
there is still a 30% chance that it can be rezoned for commercial
purposes, which will yield higher benefits. On the hand, holding
out could result in not making money because of rezoning back
to agricultural purposes. Overall, there is an 80% chance that
you will benefit. Unless Mr. Hi Roller offered at least $35,000,
then I would not sell because the summation of probability
estimates at least $14,000 profit.