Discussion:
Review the case Kootenai International, Inc. and discuss below:
Q1. Which proposal, if any, should Kootenai adopt? Defend your position based on the value effect and the present financial position of the company. Indicate why you chose the discount rate used in the analysis.
Q2. How does the financial position of the company strengthen or weaken the recommendation you made in Q1?
Q3. The assistant treasurer indicates to you that one of the Electronic Products senior managers thinks capital should be allocated to his unit instead of to the Lodging Group. How should the assistant treasurer respond to this concern? (You may use any business concept or approach to answer this, not limiting the answer to the credit policy pro-posals.)
Q4. What competitor reactions are likely if Kootenai unilaterally makes one or both credit policy changes? How might this be incorporated into the present analysis?