constructing and selling a luxury apartments complex. However, a factor that complicates the issue is that the property is currently in an area used only for detached housm4e believes that a referendum can be organised in time for the 7.13 An Urban Development Purchasing Problem 249 SI5.000.000 Table 7.1 Estimations of costs and income Estimations of income Income from selling apartments Estimations of costs Land Building $5.000.000 $8.000.000 Table 7.2 Probabilities of obtaining accurate information Changes in area approved Approved changes in area predicted 0.9 Approved changes in area not 0.1 predicted Changes in area not approved 0,2 0.8 November elections. If the referendum is passed, the property area will be changed and it will be possible to build apartment blocks. The sealed bid procedure entails Jake having to send a certified cheque covering 10 % of the amount offered. If the offer is rejected, the deposit paid will be returned. If the offer is accepted, the deposit will become the initial payment for the property. However if the offer is accepted, and the bidder does not continue with the purchase, and does not meet the remaining financial obligations within the next 6 months, the deposit will be lost. In this case, the province of Alicante will offer the property to the next highest bid. In order to determine if Playaview must present the offer of 5 million $. Jake carried out a preliminary analysis which gave him an estimation of 0.3 for the probability of passing the referendum to change the area, which gave the estimations of the costs and income indicated in Table 7.1, which would be incurred if the apartments were built. If Playaview acquires the property and the changes in the area are not approved in November, Jake thinks that the best option would be that the firm does not purchase the property: Jake has suggested that the firm contracts a market research service to conduct a survey among voters, which should provide a better estimation of the possibility of deciding on the changes in the area by referendum. The market research firm is happy to conduct the study, which will be available by 1 August, at a price of 15,000$. Table 7.2 shows the estimations of probability related with the accuracy or preciseness of the market research information: (a) Draw a decision tree showing the logical sequence of the decision problem. (b) Indicate the decision strategy that Playaview should adopt if no market research study is done. (c) Justify if Playaview must resort to a market research firm or not. eta abfidebat G