If Oceanview submits the highest bid and obtains the property, the firm plans to build and sell a complex of luxury condominiums. However, a complicating factor is that the property is currently zoned for single-family residences only. Glenn believes that a referendum could be placed on the voting ballot in time for the November election. Passage of the referendum would change the zoning of the property and permit construction of the condominiums,
The sealed-bid procedure requires the bid to be submitted with a certified check for 10% of the amount bid. If the bid is rejected, the deposit is refunded, If the bid is accepted, the deposit is the down payment for the property. However, if the bid is accepted and the bidder does not follow through with the purchase and meet the reminder of the financial obligation within 6 months, the deposit will be forfeited, In this case, the county will offer the property to next highest bidder.
To determine whether Oceanview should submit the $5 million bid, Glenn has done some preliminary analysis. This preliminary work provided an estimate of 0.3 for the probability that the referendum for a zoning change will be approved and resulted in the following estimates of the costs and revenue that will be incurred if the condominiums are built. Cost and revenue Cost [continues]
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