1* Regarding the answer obtained in Question 2 as the base-case strategy, make a judgement on the.

1* Regarding the
answer obtained in Question 2 as the base-case strategy, make a judgement on
the best strategic

option given the following:

If the firm were liquidated the operating assets
could be sold, net of the repayment of liabilities, for a total of 20m.

If the firm separated its A division from its B
division then A could be sold for 10m and the B division would

have the following Rappaport value
drivers

The B division had sales in the

1* Regarding the
answer obtained in Question 2 as the base-case strategy, make a judgement on
the best strategic

option given the following:

If the firm were liquidated the operating assets
could be sold, net of the repayment of liabilities, for a total of 20m.

If the firm separated its A division from its B
division then A could be sold for 10m and the B division would

have the following Rappaport value
drivers

The B division had sales in the last year of 15m.

If both divisions are retained and a new product
differentiation strategy is attempted then the following Rappaport value
drivers will apply

Q171;

1* a Conduct
sensitivity analysis on the shareholder value analysis of Question 2, changing
the required rate of return

to 14 per cent and 16 per cent, and changing the
planning horizon to Year 5 and Year 6. Present the results in a table and
comment on them briefly.

b Discuss the advantages and disadvantages of using
shareholder value analysis.

2 Last year Tops plc
(a firm financed entirely by equity) produced an accounting operating profit
after tax of 5m. Its equity cost of capital is 14 per cent and the firm has
50m of capital. What was the economic profit?

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