Wednesday, December 07, 2005

Johnson and Johnson buys heart devic maker corporation

Johnson and Johnson have decided to buy Guidant Corp. which specializes in making heart devices. They have settled on the price 21.5 billion. They have considered backing out though due to the legal issues surrounding the corporation when they recently had to recall thousands of pacemakers. If they were to back out now it would cost them 300 million dollars, plus the man hours and costs of making the arrangements for this transaction, but the latter two are sunk costs. Do you think that this is a bad business decision for Johnson and Johnson Co.? Do you think that Guidant Corp.'s reputation will affect sales? Would it be wiser to pay the 300 million and get out now?

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