5 Suppose that the developer was selling two contracts. One contract permits you to purchase a lodge any time during the six-month period and the other allows you to purchase the lodge only at the end of six months. Which of the two contracts is worth more? Explain. (15 marks)

A developer has just acquired 60 acres of property in Ngorongoro to develop a safari wildlife centre. The safari centre will also include a hotel development. In order to generate operating capital, the developer is selling rights. The rights give the holder of the contract the right to purchase a lodge in the hotel development for a fixed price. Each lodge is half an acre. The agreements expire six months after they are signed.
The developer is offering the following inducement. A potential lodge owner can purchase the lodge for TSh25million at the end of six months if the lodge owner enters into the contract this week. The purchase price for a lodge increases to TSh40million on all contracts signed after this week.