Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

Exercise 7

The Black Diamond Company mines coal. It would like to build a processing plant right next to its major mine. The location of this mine is relatively remote and is not near other coal mines. Tax considerations, as well as government regulations, dictate that the processing plant be owned and operated by some independent company (other than Black Diamond). Your company, the Greg Norman Coal Company, is considering building and operating the plant for Black Diamond on a contract basis. Your job is to negotiate the contract with Black Diamond. Discuss the terms that you will try to get Black Diamond to agree to in the contract. Explain why these terms are important to you.