Brown Fortman Case

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Olin School of Business Washington University in St. Louis-Fudan University EMBA Course # B62-741 Professor Anjan Thakor Spring (April) 2012 FINAL EXAM Instructions: 1) This is a take home exam. The total number of points is 100. 2) Answer all questions on the exam itself. 3) Explain all your steps (I can’t give you credit if I can’t understand how you arrived at your answer) unless you are explicitly instructed not to. 4) Good luck! Part I (45 points): Short questions. Either fill in the blanks or mark something as True or False (no need to show calculations here). (1) The two main reasons why acquiring firms’ shareholders do not benefit much from acquisitions are that the acquirer: (2 points)  The synergy benefit is over estimated during acquisition process  Underestimate importance of “culture compatibility” (2) Suppose during a particular year a firm has a NOPAT of $400, increase in Net Fixed Assets of $50, increase in cash balances during the year of $20, and an increase in noncash net working capital of $45. What is this firm’s free cash flow for the year? (2 points)    Increase in NFA: $50 Increase in NWC: $20+$45=$65 FCF=NOPAT-increase in NFA-increase in NWC=$400-$50-$65=$285 (3) The four key elements of a good corporate strategy that has the potential to create substantial shareholder value are: (4 points)  Good strategy must think more expansively about the right scope.  Can typically distinguish the firm sharply from its competition.  Match opportunities to capabilities and core competencies.  Corporate focus (4) Describe how the four key elements of the Value Sphere interact to create value ( don’t just list the four elements—describe how they interact): (4 points) There are four elements of Value Sphere: Strategy, Resource acquisition & allocation, Performance metrics, People & organization culture. The different

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