When Should a Business Be Divested

question 5

Multiple Choice

When should a business be divested?

• A) When the business is worth more to another company than to the parent company.
• B) When the parent company would want to get into that business if it were not already in it.
• C) When the business provides valuable strategic or resource fits for another company.
• D) When shareholders would be better served if the company sells the business for a generous premium.
• E) When the business lacks the cross-boundary presence of shared values and cultural compatibility.

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Definitions:

Investment Spending

Investment spending refers to expenditures made by businesses or individuals on capital goods intended to be used for future production.

Present Value

The contemporary value of a future financial amount or series of cash movements, given a pre-specified rate of return.

Interest Rate

The percentage at which interest is charged or paid for the use of money, often expressed annually.

Investment Options

Various financial assets or vehicles in which individuals or entities can invest money with the expectation of achieving a return.