Question 1
(a) Analyse how you would determine whether the combined value of a company's diversified businesses is greater to the company than each of the individual businesses. Provide reasons for your analysis.
You need to support your answers with quantitative and qualitative research. You are NOT required to do a full DCF valuation for part (b).
Required : Logical, clear and succinct explanation of how you would determine the combined value of businesses of a diversified company. Logical and relevant reasons given for your point of view,skilfully integrating comprehensive research provided to support view.
Question 2
Conduct your own research on Woolworths Limited in order to address the following questions:
(a) Do you believe that the combined value for Woolworths Limited of its businesses is greater than the value of each of the individual businesses? Justify your opinion.
Required : Excellent and logical opinion with robust and relevant justification based on extensive research of whether Woolworths Limited's combined value is greater than the value of its individual businesses.
(b) Why do you think Woolworths Limited has pursued a diversification strategy? Explain your choice.
Required : Excellent, logical and substantiated explanation for Woolworths pursuing a diversification strategy with clear reference to correct reasons in the textbook and evidence of further research.
(c) What type of diversification has Woolworths' adopted? Explain its key features and why you think this type of diversification was chosen. Support your answer with a diagram that shows the relationship of the businesses.
Required : Correct identification of type of diversification selected by Woolworths Excellent, logical and substantiated explanation of Woolworths' choice of diversification. Use of a detailed diagram that clearly and logically shows how the relationship of the businesses.
(d) Assess the level of success you think Woolworths has achieved from diversification of its businesses.
Required : Excellent and logical explanation of Woolworths level of success or achievement.
Explanation skillfully integrates evidence of wider research and use of appropriate performance ratios and measures.