Question

Talbot, a financial analyst for FTE Corporation, must choose one of four projects for his firm to pursue. Talbot has summarized the financial and social impact of each project in the table below. Assuming that all aspects of the four projects are the same, which one should Talbot recommend to the President of FTE Corporation to maximize shareholders’ wealth?

Bellar

Constad

Abron

Dundar

Location	Upfront Costs	Expected Operating Income	Positive Social Impact
Abron	$250,000	$500,000	None
Bellar	$250,000	$450,000	Increase employment
Constad	$300,000	$400,000	Reduce pollution
Dundar	$275,000	$475,000	Benefit the community

Answer 1

Answer

The four locations which are provided in this scenario are the Abron, Bellar, Constad and Dundar. The upfront cost is lower in the case of both Abron and Bellar. On the other hand, the expected operating income is highest in the case of Abron. Every organization main objective is to maximize the shareholder's wealth. It is only possible if the company accelerates the overall production which will automatically enhance the revenue or profitability position of the company. Based on the detailed analysis it can be interpreted that Bellar is the most likely option to be qualified for this particular project of FTE Corporation. The reason behind that is it will generate the most positive social impact by enhancing employment opportunities. It will also work as a beneficiary for the present government of Bellar. In the case of parameters which are the upfront cost and expected operating income Bellar has the lowest upfront costa and pretty high expected operating income in comparison to that of the other three locations. An increase in the employment opportunities will gradually enhance the overall productivity of the company in Bellar. Further, the growth of the company will attract potential shareholders in the business which will lead to a rise in the growth and future investment opportunity of FTE Corporation.