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Valuation: Measuring and Managing the Value of Companies, Sixth Edition
Chapter 7 Growth
Solutions
1. The three sources of growth are (1) portfolio momentum (expanding the market), (2) market
share performance, and (3) mergers and acquisitions. The Baghai, Smit, and Viguerie study
2. Of the two choices, additional growth will create more value for the high-ROIC firm in the
3. Bolt-on acquisitions tend to create more synergies because the acquiring firm has large existing
4. Wal-Mart’s ability to force weaker competitors out of the market is one example where price
wars created long-term value for the firm. Wal-Mart consistently entered markets and drove
5. Fast-growing companies must find new product markets and enter these markets during high-
growth phases, which is difficult to continually accomplish.
6. To maintain a high growth rate, a company must develop new products. Without new products,
growth will decline quickly. High ROIC from existing products can be sustained for a longer
7. The rankings of firms by growth rates vary greatly over time because of structural factors such
as efficiency improvements that lead to less demand and saturation of markets. As some
8. Companies put effort into product promotion and pricing competition for two reasons. First, of
the three methods for creating value, it is the most easily implemented. Second, and on a
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