Question

Sounders Management Company owns and provides management services for several shopping centers. After 5 years with the company, James Heller was recently promoted to the position of manager of Brunswick, an 18-store mall on the outskirts of a downtown area. When he accepted the assignment, James was told that he would hold the position for only a couple of years because Brunswick would likely be torn down to make way for a new sports stadium. James was also told that if he did well in his assignment, he could be in line for heading one of the company’s new 200-store operations that were currently in the planning store. While reviewing Brunswick’s financial records for the past few years, James observed that last year’s oil consumption was up by 8%, even though the number of heating degree days was down by 4%. Somewhat curious, James uncovered the following information:

• Brunswick is heated by forced air oil heat. The furnace is 5 years old and has been well maintained
• Fuel oii is kept in four 5,000-gallon underground oil-tanks. The oil tanks were installed 25 years ago.
• Replacing the tanks should cost $80,000. if pollution was found, cleanup costs could go as high as $2,000,000, depend on how much oil had leaked into the ground and how far it had spread Brunswick
• Replacing the tanks should add more congestion to Brunswick ‘s parking situation

Required:

What should James do? explain

Answer 1

James must certainly highlight it to the management that although the heating degree days were down, the consumption of the fuel is still high due to obsolete underground tanks. Also, as a part of social responsibility the company must opt for newer technologies and clean up the pollution that has happened as a result of oil leakage. The inefficiency of the machinery must not disturb the ecology of the surroundings and also the company will save in additional costs. Along with it the company can save on taxes via depreciation although it may incur substantial capital expenditure. Although the city may be torn to make way for a new stadium, the possibility of the same must not undermine the current situation.