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Valuation: Measuring and Managing the Value of Companies, Fifth Edition
Chapter 19 Solutions
Corporate Portfolio Strategy
1. Different owners have different skills and goals. Thus, one owner may be able to innovate
and to lead the company in a way to increase cash flows and growth. When a firm is
2. The five potential sources of value are (1) unique links with other businesses, (2)
3. One impediment to matching the best potential owner is not having a complete list of all
4. The story of Duracell in the 1970s and 1980s shows how different owners can benefit a
Industries. The acquisition gave Duracell the needed cash to fund new research to
5. A firm’s needs evolve as it goes through its life cycle. For example, the best company to
acquire a developing firm that consumes natural resources might be a company that has
For example, if the markets for raw materials are abundant, the advantage of a parent
6. The steps in constructing a portfolio are (1) assess the current portfolio and determine
7. Diversification is intrinsically neither good nor bad. However, propositions that
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8. Like the invisible hand of Adam Smith, society benefits from the resources of a company
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