Reference no: EM132624844

Ethical Problem Uncovered by Cost Estimation

Sounders Management Company owns and provides management services for several shopping centers. After five years with the company, James Heller was recently promoted to the position of manager of Brunswick, an 18-store mall on the outskirts of a downtown area. When he accepted the assignment, James was told that he would hold the position for only a couple of years because Brunswick would likely be torn down to make way for a new sports stadium. James was also told that if he did well in this assignment, he would be in line for heading one of the company's new 200-store operations that were currently in the planning stage.

While reviewing Brunswick's financial records for the past few years, James observed that last year's oil consumption was up by 8 percent, even though the number of heating degree days was down by 4 percent.

Somewhat curious, James uncovered the following information:

1. Brunswick is heated by forced-air oil heat. The furnace is ?ve years old and has been well maintained.
2. Fuel oil is kept in four 5,000-gallon underground oil tanks. The oil tanks were installed 25 years ago.
3. Replacing the tanks would cost $80,000. If pollution was found, cleanup costs could go as high as $2,000,000, depending on how much oil had leaked into the ground and how far it had spread.
4. Replacing the tanks would add more congestion to Brunswick's parking situation.

Required

Problem 1: What should James do? Explain.