When Evaluating Strategic Fit Benefits That Related Diversification Can Deliver

question 76

Multiple Choice

When evaluating strategic fit benefits that related diversification can deliver one must keep in consideration a number of factors.Which one is not relevant?

• A) Shareholder value stemming from a diversified business cannot be replicated by simply owning a diversified portfolio of stocks.
• B) The capture of cross-business strategic fits benefits is possible only through related diversification.
• C) Cross-business strategic fit benefits is not automatically realized;the benefits materialize only after management has successfully pursued internal actions to capture them.
• D) Shareholder value is created when the diversified company's profitability exceeds expectations.
• E) Related diversification is the process of holding the stock of many businesses in a portfolio.

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Definitions:

Perpetuity

A type of annuity that pays a fixed amount of money to an individual indefinitely, without a set termination date.

Compounded Semi-annually

Describes a type of interest calculation where the interest is added to the principal amount twice a year, leading to interest on the interest in the next compounding period.

Ordinary Perpetuity

A series of indefinite cash flows that occur at regular intervals.

Ordinary Annuity

A financial product where payments of a fixed amount are received at the end of equal intervals.