The CEO of Inmuebles7x24, Alberta Montemayor, is considering submitting an offer to buy a property, which will be marketed through a closed auction on a city tax share. Initially, Alberta believes he should bid $7 million. In her experience, Alberta has estimated that a $7 million bid has a 30% chance of being the highest bid and will secure the property for Inmuebles7x24. The current date is 1 January, but closed bids for the property auction must be submitted on 15 March. The announcement of the winning bid will be made on 1 April.

In case Inmuebles7x24 presents the highest bid and obtains the property, the company plans to build apartment buildings and sell each one of them. However, currently the property is divided into lots to build houses only, which complicates things. Alberta is confident that a referendum could be placed on the ballot before the next June vote. The ratification of the referendum would change the zoning of the property and allow the construction of the apartment buildings, so it is a fact that, if the auction wins, it will place the referendum. The closed tender procedure requires a transfer of 15% of the bid amount when making the proposal. If the offer is rejected, the deposit is refunded. If the offer is accepted, the deposit constitutes the down payment for the property. However, if the offer is accepted and the bidder does not proceed with the purchase or meet the financial obligations within the next six months, the deposit is lost. If this happens, the municipality will offer the property to the next bidder with the best offer.

To determine whether it is in the interest of 7x24 Real Estate to bid $7 million, Alberta did some preliminary analysis. That analysis provided an assessment of the probability of 0.25 for the approval of the referendum for a zoning change and presented the following estimates of the costs and revenues that will be incurred if departments are built:

Cost and income estimates Revenue from sales of apartments: $18,000,000 Cost Property: $7,000,000 Construction costs: $9,000,000

If Real Estate 7x24 gets the property and the zoning change is rejected in June, Alberta believes the best option would be for the company not to complete the purchase of the property, so it will not buy it. In this case, Real Estate 7x24 would lose the right to the 15% deposit that accompanied the offer. Because the likelihood that the zoning referendum will pass is a very important factor in the decision-making process, Alberta suggested that the company hire a market research service to conduct a voter survey. The survey would provide a better estimate of the likelihood of the referendum being approved for a zoning change. The market research firm with which 7x24 Development Real Estate has worked in the past agreed to do so for $16,000. The results of the study will be available on March 1, so that Real Estate 7x24 has this information before March 15, which is the deadline to make the offer. The survey results will be a prediction that the zoning change will be approved or a prediction that the zoning will be rejected. After considering the market research firms record in previous studies by Real Estate 7x24, Alberta developed the following probability concerning the accuracy of market research information: P(A| s1) =0.9 P(A | s2) = 0.2 where A= prediction that the zoning change will be approved N = prediction that the zoning change will not be approved s1 = change of zoning was approved by voters s2 = change of zoning was rejected by voters

Analyze the problem facing Real Estate 7x24 and prepare a report summarizing its findings and recommendations. Include the following:

1. A decision tree showing the logical sequence of the decision problem 2. A recommendation on what Real Estate 7x24 should do if market research information is not available. 3. A decision strategy to be followed by Real Estate 7x24 if market research is carried out. 4, A recommendation as to whether Real Estate 7x24 should contract the services of the market research firm, together with the value of the information provided by that company.