Is free cash flow a significant problem for many firms

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Reference no: EM131963725

Question: Write a 3 to 5 page paper (750 to 1200 words, not including the cover page and reference page) in APA format in response to the prompts below.

Please use the APA Sample provided in Unit 1 to complete your assignment. In this assignment, you will be assessed on the Institutional Learning Outcome of Quantitative Reasoning. Visit the LIRN to find journal articles that support your positions and cite them using appropriate APA format.

For this case study, use the company you previously selected. Please respond to the following questions:

a. Describe the conditions, if any, where your business (the one you selected in Unit 1) can expect to earn an economic profit from acquiring a new, strategically related, firm after fending off four other bidders. [Chapter 10 Problem Set Question #1 on page 303].

10.1. Consider the following scenario: A firm acquires a strategically related target after successfully fending off four other bidding firms. Under what conditions, if any, can the firm that acquired this target expect to earn an economic profit from doing so?

b. Your firm is considering the purchase of a smaller firm because it believes that it can manage the assets of that firm more efficiently. The smaller firm has free cash flow. Some researchers have argued that the existence of free cash flow can lead managers in a firm to make inappropriate acquisition decisions. To avoid these problems, these authors have argued that firms should increase their debt-to-equity ratio and "soak up" free cash flow through interest and principal payments. Is free cash flow a significant problem for many firms?

c. Your firm has decided to begin selling its products in Ghana. Unfortunately, there is not a highly developed trading market for currency in Ghana. However, Ghana does have significant exports of cocoa. Describe a process by which you would be able to sell your machines in Ghana and still translate your earnings into a tradable currency (e.g., dollars or euros).

Reference no: EM131963725

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