7 Describe the potential obligations associated with the options involving the developer and the two friends. Use

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7 Describe the potential obligations associated with the options involving the developer and the two friends.

Use diagrams to illustrate your answer. (10 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.

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Corporate Finance

ISBN: 9781526848093

4th Edition

Authors: David Hillier

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