Smith Computers specialises in buying second-hand computers and renting them out. Owing to rapid technological changes and intense competition, Smith has recorded losses in recent years and is now threatened with liquidation. Its major asset is a stock of largely obsolete computers. Foster Electrics Ltd is a newly listed company with interests in consumer electrical goods. The Chairman of Foster suggests that it should acquire Smith for two reasons. First, it provides diversification, and second, he argues that by injecting fresh capital, Smith can be "rescued" and should appreciate markedly in value. Critically evaluate the Chairman's arguments.