Case 1 Quantitative Business Analysis Dave Davenport, CEO of Seaside Real Estate of Jacksonville, FL just acquired some land close to the Atlantic...

Case 1 Quantitative Business Analysis

Dave Davenport, CEO of Seaside Real Estate of Jacksonville, FL just acquired some land close to the Atlantic Ocean. He wants to use the land to develop a gated housing community that will include a club house with swimming pool, fitness center, tennis court, and a community garden. He is very enthusiastic to build charming cottage-style homes and needs to decide between three cottage styles: The Nautical, The Shoreline, and The Seaside. Each cottage type has distinct floor plan and square footage with options of adding fire place, garage/car port, backward porch etc. At the same time, he feels an uncertainty economy makes ascertaining the demand for these new cottages difficult. Mr. Davenport realizes that building a specific type of cottage with more square footage and amenities followed by a poor economy could be very costly to the company. However, in a good economy, the firm's profit will be much better. Seaside Real Estate management team has prepared the following anticipated profit/loss (in Millions) payoff table.

                                                                       States of Nature

Decision                                             Poor               Average         Good

Alternatives                                       Economy       Economy       Economy

Nautical Cottage, d1                          5                     3.5                  -1.5     

Shoreline Cottage, d2                                 3                     -1.5                 2.5

Seaside Cottage, d3                            -1.5                 4.5                  6

➢     If nothing is known about the demand probabilities,