Wealth Max
Wealth Maximization Concepts Worksheet
Concept Application of Concept in the Scenario Reference to Concept in Reading
Growth Opportunities
The growth opportunities in the scenario include the joint venture between Lester Electronics and
Shang-we Electronics to build an additional manufacturing facility. Additionally, the proposed acquisitions of Shang-Wa Electronics by
Transnational Electronics Corporation and the proposed acquisition of Lester Electronics by Avral Electronics are also growth opportunities for the respective firms.
“Many firms have growth opportunities, that is, opportunities to invest in profitable projects,” (Ross,Westerfield & Jaffe, 2005, p. 47).
Corporate Finance
All four firms in the scenario have a strong balance sheet as well as strong credit rating. To generate more cash flow two firms are looking at acquisitions for cash flow generation. The other two firms Lester and Shang-Wa are looking at a joint venture to expand capacity for greater cash flow. “The firm must generate more cash flow than it uses. The value is reflected in the framework of the simple balance-sheet model of the firm,” (Ross,Westerfield & Jaffe, 2005, p.3).
Survival
Lester Electronics is really the only firm that is experiencing organizational survival. If they do not partner with Shang-wa their revenue will decrease 43% over the next five years. The will need to explore the capital investment to partner with Shang-Wa vs. the offer sheet from Avral Electronics. “Organizational survival means that management will always try to command sufficient resources to avoid the firm's going out of...
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