Assignment 2: Discussion—Differences between Value and Returns
Evaluating the benefit an opportunity can provide is complex. When measuring an economic benefit, you must look at the real return, the nominal return, and the overall value. In many cases, a project might generate a negative return in the short term but may be of value in the long term. You may take on a project for its business, knowing that the project is a losing proposition but will compensate for this loss by bringing in a new project later that will generate a positive return, or future value. This assignment will illustrate this concept. Firms need to distinguish between value creation and the returns they obtain from their investments.
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Locate an article from the Internet that deals with firms distinguishing between value creation and the returns they obtain from their investments. You can consult sources such as the Wall Street Journal, Financial Times, Bloomberg Markets, the Economist, US News and World Report, and other publications for conducting this research.
On the basis of the selected article, address the following questions:
- What are some of the strategies that firms engage in to create value?
- What is the difference between adding value in the value chain and creating returns for shareholders?
- Why does adding value to the firm and creating returns for shareholders in the short run and long run matter?