You Are Considering an Investment in a Tree Farm

question 2

Essay

You are considering an investment in a tree farm. Trees grow each year by the following factors: The price of lumber follows a binomial lattice with 0. The interest rate (risk-free) is constant
at 6%. It costs $2 million each year, payable at the beginning of the year, to lease the forest land. The initial value
of the trees is $5 million (assuming they were harvested immediately). You can cut the trees at the end of any
year and then not pay rent after that. With rent of $2 million per year, find the best cutting policy and the value
of the investment opportunity.

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Definitions:

Cognitive Restructuring

A psychotherapeutic process of learning to identify and dispute irrational or maladaptive thoughts known as cognitive distortions, such as "all-or-nothing" thinking.

Pessimistic Attributional Styles

A tendency to habitually explain negative events with causes that are stable, global, and internal.

Internal Validity

The extent to which a research study provides evidence that a causal relationship exists between the variables tested, without influence from external factors.

External Validity

How much the outcomes of a research can be extrapolated to different contexts and different people.