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When a Firm That Follows the Unrelated Diversification Strategy Allocates

Question 90

Multiple Choice

When a firm that follows the unrelated diversification strategy allocates capital from internal sources,it can create value by doing all of the following EXCEPT:


A) Using more efficient budgeting processes than the external market.
B) Discovering privately which business units provide the highest return to invested capital.
C) Disregarding its debt rating and investing large amounts of capital in projected growth areas.
D) Accessing capital at a lower cost.
If a firm does not effectively manage its debt rating, the cost of capital could go up as evidenced by GE.

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