Busy plc, an all equity-financed firm, has three strategic business units. The polythene division has capital...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Busy plc, an all equity-financed firm, has three strategic business units. The polythene division has capital of £8m and is expected to produce returns of 11 per cent for the next five years. Thereafter it will produce returns equal to the required rate of return for this risk level of 14 per cent. The paper division has an investment level of £12m and a planning horizon of ten years. During the planning horizon it will produce a return of 22 per cent compared with a risk-adjusted required rate of return of 15 per cent. The cotton division uses £2m of capital, has a planning horizon of seven years and a required rate of return of 16 per cent compared with the anticipated actual rate of 17 per cent over the first seven years. a Calculate the value of the firm. b Draw a value-creation and strategic business unit performance spread chart. c Develop five ideas for increasing the value of the firm. State your assumptions. Busy plc, an all equity-financed firm, has three strategic business units. The polythene division has capital of £8m and is expected to produce returns of 11 per cent for the next five years. Thereafter it will produce returns equal to the required rate of return for this risk level of 14 per cent. The paper division has an investment level of £12m and a planning horizon of ten years. During the planning horizon it will produce a return of 22 per cent compared with a risk-adjusted required rate of return of 15 per cent. The cotton division uses £2m of capital, has a planning horizon of seven years and a required rate of return of 16 per cent compared with the anticipated actual rate of 17 per cent over the first seven years. a Calculate the value of the firm. b Draw a value-creation and strategic business unit performance spread chart. c Develop five ideas for increasing the value of the firm. State your assumptions.
Expert Answer:
Answer rating: 100% (QA)
a To calculate the value of the firm we need to calculate the present value of the expected future cash flows from each division discounted back to th... View the full answer
Related Book For
Posted Date:
Students also viewed these accounting questions
-
Blue plc is a relatively small company with only one SBU. It manufactures wire grilles for the consumer market for cooker manufacturers and for export. Following a thorough investigation by the...
-
Managing Scope Changes Case Study Scope changes on a project can occur regardless of how well the project is planned or executed. Scope changes can be the result of something that was omitted during...
-
Raindeer PLC is a highly profitable electronics company that manufactures a range of innovative products for industrial use. Its success is based to a large extent on the ability of the companys...
-
For nearly 50 years, Loganville Window Treatments (LWT) of Loganville, Georgia, has made interior shutters that are sold through decorating centers. Figure 3.20 shows some of the various styles of...
-
The original IBM PC and its clones employed the Intel 8088/8086 microprocessor. This machine did not incorporate a mode bit for supervisor and user modes. Hence, any application program (written in...
-
Do professional standards allow a company's auditors also to provide tax services and retain their independence?
-
Derive the expression of work done by the compressor in isothermal compression, adiabatic compression, and polytropic compression.
-
The distribution coefficient of styrene distributed between ethylbenzene and ethylene glycol at 25C is 0.19mass fraction in the ethylene glycol phase per mass fraction in the ethylbenzene phase. One...
-
Explain demographic transition theory as was proposed by Warren Thompson and highlight the stages of development transition
-
The information provided in this project allows you to set up the General, Payables, and Receivables ledgers for an Ontario company named CHRIS'S WELDING, owned and run by Chris George, a master...
-
Let A = Find the eigenvectors and eigenvalues of A2. -1 2 -1 2 -1 -1 -1 -1 2 -
-
If multiple parties have an interest in the same collateral, how does a court decide who get the collateral if theres a default?
-
During a review of indirect rates, the contracting officer finds that overhead costs were improperly reported and certified. Some of the overhead pools accounted for costs that should have not been...
-
2a) Find A, A2, A3, A Boolean, A[2] and A[3] 2 3 b) Use Warshall's algorithm to find R. Hint, what should R be when you finish?
-
A particle is equally likely to lie anywhere on the circumference of a circle of radius R. Consider as the z axis any straight line in the plane of the circle and passing through its center. Denote...
-
Go to a stock price quote site (or WSJ), choose a publicly-traded stock and get its price, dividend yield, 52 weeks high and low price, its P/E ratio, and its beta. Is this stock a growth stock or...
-
II. D-T and V-T GRAPHS. Convert the D-T Graph into its V-T Graph. The y-axis is the displacement in terms of km and the x-axis is the time in terms of hr. -$ -10 10 15 20
-
The following exercises are not grouped by type. Solve each equation. x610x -9
-
Sasha Inc. (SI) is a public company located in Canada that operates a chain of retail stores. SI reports its financial statements in Canadian dollars and has recently started to purchase goods from...
-
Trudel Drama Club is a drama club for people under the age of 30. It provides an opportunity for young people to learn about drama and perform in the theatre at levels consistent with their skills...
-
Transactions and items for a public sector entity applying the CICA PSA Handbook (not referring to Sections PS 4200 to PS 4270) are as follows: 1. Issue of a debenture 2. Inventories of goods for...
-
Rank in order, from largest to smallest, the size of the friction forces in the five different situations (one or more friction forces could be zero). The box and the floor are made of the same...
-
The terminal speed of a Styrofoam ball is 15 m/s. Suppose a Styrofoam ball is shot straight down with an initial speed of 30 m/s. Which velocity graph is correct? Vy (m/s) Vy (m/s) v, (m/s) vy (m/s)...
-
Boxes P and Q are sliding to the right across a frictionless table. The hand His slowing them down. The mass of P is larger than the mass of Q. Rank in order, from largest to smallest, the horizontal...
Study smarter with the SolutionInn App