As a result, Spirit Electric came to a standstill in the latter part of 2009. Matt...

As a result, Spirit Electric came to a standstill in the latter part of 2009. Matt Green, Spirit electric CEO gathered the Board of Directors and determined that the company would need to take some sort of course of action in order to remain functioning. Matt Green outlined 4 proposals and urged each board member to vote accordingly, providing justification to their proposal. The following are the proposals: Proposal 1 Ask the government for a bailout of $30 Million dollars to allow Spirit Electric to continue operating. Pay back will be at 15% within 5 years. 1. Choose one of the proposals listed above as the proposal that you would consider to be the most efficient and best for the people of Detroit. Explain why the proposals would not be effective. 2. Is competition needed in this situation? How does competition alter the dynamics of city? Household? 3. Taking into account that Spirit Electric is operating as a natural monopoly, what should be its goal? How should it determine its price? 4. How should you forecast the outcome for Spirit Electric? 5. What are the different types of risk involved in your proposal? 6. What types of costs should be considered in your proposal? 7. Did a principle agent problem occur in this situation? How can it be avoided moving forward?

Expert Solution

Rahul Sunny answered 2 years ago

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How should you forecast the outcome for Spirit Electric a natural monopoly?

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