Cholern Electric Company (CEC) is a public utility that provides electricity to the central Colorado area. Recent events at its Mile-High Nuclear Station have been discouraging. Several shareholders have expressed concern over last year's financial statements.

Recently, a wealthy group of individuals has offered to purchase half of CEC's assets at fair market price. Management recommends that this offer be accepted because "We believe our expertise in the energy industry can be better exploited by CEC if we sell our electricity generating and transmission assets and enter the telecommunications business. Although telecommunications is a riskier business than providing electricity as a public utility, it is also potentially very profitable." Should the management approve this transaction? Why or why not?

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Income Statement Last Year ($ in millions) Balance Sheet End of Year ($ in millions) Revenue Fuel Other expenses Interest Net income $110 Assets 50 Debt 30 Equity $400 300 100 $ 0