Chapter 4 Discussion Questions:

Answer any five of the following questions:

1. Discuss how you would use information obtained from the external, internal, andopportunities/threats identification analyses conducted during the business planning processto select an appropriate business strategy. Be specific.
2. Discuss how you would select the appropriate implementation strategy. Be specific.(Hint: Consider the resources—broadly defined–required/currently available to exploitpotential opportunities and threats.)
3. Why might Adobe have decided to acquire Omniture rather than to partner with Omniture orto build a similar capability on its own?
4. What considerations might have made Omniture an attractive acquisition target for Adobe?
5. Identify at least 3 criteria that might be used to select a manufacturing firm as a potentialacquisition candidate? A financial-services firm? A high-technology firm?
6. Despite weeks of sometimes heated negotiation, the seller continues to insist on a purchaseprice that is $5 million more than the potential buyer is willing to pay. How can the buyerand seller close the “price gap?” Be specific.
7. Following due diligence, the buyer is concerned about the outcome of pending litigationfacing the seller. The potential impact over the next three years if the firm were to lose thelawsuits could be as high as $4 million. How can the buyer protect herself against thispotential liability if she acquires the target firm?
8. The CEO of the acquiring firm insists that the integration of the target firm must becompleted as rapidly as possible in order to realize the full value of estimated synergies.Why might the CEO feel this way? What are the risks associated with a rapid integration ofthe target firm into the acquirer? What are the risks of a slow integration of the target firminto the acquirer?
9. The CEO of a small start-up firm has just been contacted by a potential acquirer, who isoffering to buy the firm for a very attractive purchase price. However, the CEO refuses toprovide any data on her firm until the potential buyer provides her with three years of signedFederal income tax statements, personal bank statements, and a net worth statement. Why?Is the CEO being reasonable? What alternatives does she have if the buyer refuses to providethis information?

Chapter 5 Discussion Questions :

Answer any three of the following questions:

1. Identify several criteria that might be used to select a manufacturing firm as a potentialacquisition target? A financial-services firm? A hi-tech firm?
2. Describe how the various activities that occur concurrently during the negotiation processaffect the determination of the final purchase price for the target. Be specific.
3. What is the purpose of the buyer and the seller performing due diligence? What other partiesmight want to perform due diligence on the target firm?
4. Describe the financing plan. In what sense is it a “reality check?”
5. Of the various activities conducted during post-closing integration, which do you believe is themost important and why?

Chapter 6 Discussion Questions:

Answer any three of the following questions:

1. Why is the pace with which businesses are integrated important? Be specific.
2. Why is it critical to make the tough decisions about who to put in key management positionsearly in the integration effort?
3. Why are firms likely to lose customers during the integration period?
4. Identify the main challenges of developing a new organization for the combined businesses.How would you attempt to resolve these challenges? Be specific.
5. What are the common methods for integrating corporate cultures? Of these, which do youbelieve would be the most important? Explain your answer.

Chapter 7 Discussion Questions and Problems:

Answer the questions below:

1. Answer any two of the following questions:
   1. How does the size of the firm affect its perceived risk? Be specific?
   2. How would you estimate the beta for a publicly traded firm? For a private firm?
   3. Explain the difference between equity and enterprise cash flow?
   4. What is the appropriate discount rate to use with equity cash flow? Why? With enterprisecash flow? Why?
2. Abbreviated financial statements are given for Fletcher Corporation in the following table:

Yearend working capital in 2014 was $156 million and the firm’s marginal tax rate is 40% inboth 2015 and 2016. Estimate the following for 2015 and 2016:

1. Free cash flow to equity.
2. Free cash flow to the firm.

3. Free cash flow to equity last year was $5 million. It is expected to grow by 25% in thecurrent year, at a 20% rate annually for the next five years, and then assume a more normal5% growth rate thereafter. The firm’s cost of equity is 10% and weighted average cost ofcapital is 8% during the high growth period and then drop to 8% and 6%, respectively, duringthe normal growth period. What is the present value of the firm to equity investors (equityvalue)? If the market value of the firm’s debt is $15 million, what is the present value of thefirm (enterprise value)?