The planning officer of your airline has been gathering information concerning several opportunities for your firm. Since the climate seems good for additional common stock sales and bank loans, the possibilities of expansion through merger and acquisition seem very good. An opposite twist has also presented itselfan offer to purchase your airline. A thorough investigation and analysis by a competent financial analyst specializing in such matters will cost $3,000 for each item listed below and will be completed in three to nine months (with the exception of selection M which costs $6,001). This would be a necessary first step in pursuing any of these business opportunities. Although these opportunities may not be possible before the end of the simulation, your instructor wants you to determine which you feel are appropriate. Select the total amount (in the decision input screen) you want to spend for the investigation(s), e.g., $6,000, 9,000, 12,000, etc. Risk factors as shown below are on a scale of very low risk (1) to very high risk (10). The risk factor takes into account the economic stability of that particular type of business, the difficulty in operating it, competition, and the profit potential.

a) Acquire a food service company that serves several airlines. It is located in the airline's largest hub. The cost is $500,000 and the Return on Investment (ROI) is estimated to be in the 12-20% range with a risk factor of 5.

b) Go into the car rental business at one of your high-traffic cities. The facts are the same as presented in Incident: "DiversificationAuto Rental" except it is in a different city than depicted in that incident. Risk factor 5.

c) Begin a new company that would refurbish commuter aircraft. Due to the increasing cost of new aircraft, it is felt that many airlines would be interested in rebuilding and refurbishing their current fleet instead of purchasing a new fleet. The cost would be $2 million and the ROI is estimated to be in the 15-28% range with a risk factor of 6.

d) Acquire a ground service business that serves eight cities, including three that you are currently serving. This type of business handles all baggage, refueling, interior cleaning and restocking of rest rooms, etc., for airlines. The parent company of the service wants to concentrate on businesses more in line with its other holdings and is willing to sell for $1 million. The ROI is estimated at 14-25% with a risk factor of 6.