The President of EEC recently called a meeting to announce that one of the firm’s largest suppliers of component parts has approached EEC about a possible purchase of the supplier. The President has requested that you and your staff analyze the feasibility of acquiring this supplier. Discuss the following:
- What information is needed to analyze this investment opportunity?
- What will be your decision-making process?
- All future costs are relevant in decision making. Do you agree? Why?
- Capital budgeting decisions fall into 2 broad categories: screening decisions and preference decisions. Discuss this.
- Which do you think EEC should use—screening decisions or preference decisions? Why?