Strategic Investment Management

    Question 1

    (a) Calculate the weighted average cost of capital (WACC) for both Sesperian plc
    and Agrosolutions plc, and then determine which one should be used in the
    valuation calculations. No explanation is required of your choice of WACC. [7
    marks] 

    …….

    (b) Using the Discounted Cash Flow method, calculate the stand-alone valuation
    of Agrosolutions plc prior to the inclusion of synergies. [20 marks]
    (c) Recalculate the stand-alone valuations of Agrosolutions plc after the inclusion
    of the synergies. [8 marks]

    Question 2

    (a) Outline a bidding strategy that the Board of Sesperian plc might have
    formulated based on the valuations calculated in parts (b) and (c) above. [15
    marks] 

    …….

    (b) In the discussion regarding which WACC to use for the valuation of
    Agrosolutions plc Rufus Banda mentioned that different WACCs might be
    needed to reflect different financial risk and business risk. Using suitable
    examples, including those drawn from the case study, distinguish between
    business and financial risk and from your research discuss how such risks
    can be alleviated in practice. [15 marks]

    Question 3

    (a) Explore how behavioural aspects can influence financial decisions in general,
    and then more specifically to the case study. In particular draw on the
    comments made by Jay Sixsmith regarding the fear of overpayment for the
    acquisition of Agrosolutions plc. [17 marks]
    (b) Provide a critical appraisal of the comment made by Rebecca Donato that it
    was debateable that efficient markets exist at all levels. You are expected to
    appraise the general concept of efficient financial markets, as well as
    exploring the implications of efficient markets to this case study in particular.
    [18 marks]

    …….

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