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Chapter 15 Case Problem Property Purchase Strategy

This document analyzes whether a company should submit a $5 million bid to purchase property. It creates a decision tree and recommends against employing a firm to conduct $274,700 in market research, as the value gained does not outweigh the cost. If research is unavailable, submitting the bid risks a 30% chance of losing a $500,000 deposit if zoning does not change.

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0% found this document useful (0 votes)
51 views

Chapter 15 Case Problem Property Purchase Strategy

This document analyzes whether a company should submit a $5 million bid to purchase property. It creates a decision tree and recommends against employing a firm to conduct $274,700 in market research, as the value gained does not outweigh the cost. If research is unavailable, submitting the bid risks a 30% chance of losing a $500,000 deposit if zoning does not change.

Uploaded by

vlad vlad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Mercede Daugherty

Chapter 15 Case Problem- Property Purchase Strategy

April 22nd, 2022

Business Analytics Capstone

BAN-6093-OL2

Trine University

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RUNNING HEAD: Chapter 15 Case Problem- Property Purchase Strategy

Objective: The objective of this case study is to perform an analysis and figure out whether

Oceanview should submit the $5 million bid and to provide reasoning for my recommendations.

1. Below is the decision tree that I created to show the logical sequence of this case study

decision problem.

2. Below is my recommendation regarding what Oceanview should do if the market

research information is not available:

Decision square (5) shows what the scenario would look like if there is not any market

research info available. If there is not an active bid at decision square (5) then Oceanview will

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RUNNING HEAD: Chapter 15 Case Problem- Property Purchase Strategy

not be receiving any costs or revenues. There for Oceanview would make $0 from this. Now on

the flip side if the company does submit the $5,000,000 bid there is a 0.2 chance (or 20%) that it

will be accepted. On top of that if Oceanview’s bid goes on to get accepted there is a 0.3 chance

(or 30%) that there will be changes in the zoning policy. Considering that this zoning policy

doesn’t change then when Oceanview purchases the property they are going to be giving up their

$500,000 deposit as discussed in the case study prompt. This is shown in the above decision tree

and broken down in the visual below.

This course of action could be taken but there will be the risk present that the zoning policy

doesn’t change and Oceanview loses the money from their deposit.

3. Considering the information above I think the Oceanview should utilize the market

research conducted.

If the zoning policy changes passes:

If the zoning policy changes doesn’t pass:

So, if it passes then I think Oceanview should utilize the market research conducted. But if it

doesn’t pass then I don’t think that Oceanview should utilize the market research conducted.

4. My recommendation to Oceanview is that they shouldn’t employ the firm because it

would cost them $274,700 for the info. I don’t think that the value that Oceanview will get

in the long run from the market research info will be well worth it for them.

This study source was downloaded by 100000831278438 from CourseHero.com on 04-21-2024 07:27:50 GMT -05:00

https://www.coursehero.com/file/145409568/Chapter-15-Case-Problem-Property-Purchase-Strategydocx/
RUNNING HEAD: Chapter 15 Case Problem- Property Purchase Strategy

This study source was downloaded by 100000831278438 from CourseHero.com on 04-21-2024 07:27:50 GMT -05:00

https://www.coursehero.com/file/145409568/Chapter-15-Case-Problem-Property-Purchase-Strategydocx/
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