Please use the following textbook in answering the questions: Palepu, K.G. & Healy, P.M...

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Please use the following textbook in answering the questions: Palepu, K.G. & Healy, P.M XXXXXXXXXXBusiness Analysis and Valuation: Using Financial Statements: Using Financial Statement; Text and Cases (4th ed.). Cengage Learning. The following questions pertain to the Anacomp case in the Palepu text (Additional Cases section), pages XXXXXXXXXXpoints) Evaluate Anacomp's business new product development strategy. What are the risks and benefits of this strategy for Anacomp’s shareholders? 3.
	
Document Preview: Please use the following textbook in answering the questions:Palepu, K.G. & Healy, P.M XXXXXXXXXXBusiness Analysis and Valuation: Using Financial Statements: Using Financial Statement; Text and Cases (4th ed.). Cengage Learning. The following questions pertain to the Anacomp case in the Palepu text (Additional Cases section), pages 27-492. (25 points) Evaluate Anacomp's business new product development strategy. What are the risks and benefits of this strategy for Anacomp’s shareholders?3. (20 points) How is Anacomp’s accounting influenced by the way the company organizes and finances its new product development? Note: At the time of the case, software developments costs were allowed to be capitalized even when a company did not use the R&D partnership mechanism.4. (15 points) Compare Anacomp’s cash flow performance with its accounting performance.  What is your evaluation of the company’s financial condition?5. (10 points) What is your assessment of Anacomp’s future? Justify your answer.Show all your work/calculations (partial credit applies). Do not write as a paper, simply answer the above questions, but provide the supporting detail in doing so. Number each answer according to the corresponding question.

David · Accepted Answer

Question 1: Evaluate Anacomp's business new product development strategy. What are the 
risks and benefits of this strategy for Anacomp’s shareholders? 
Anacomp’s business new product development strategy primarily involved the developement 
software systems via various limited partnerships (i.e. significant interests was held by the 
affiliated officers as well as directors), along with Anacomp having the provision towards 
acquiring all the rights upon its completion. CIS is one of the examples of this development 
strategy. Anacomp had started the development of this major new computer software system that 
was called Continuous Integrated System (CIS) that was to be marketed to some of the top notch 
financial institutions, with the help of limited partnership with the RTS Associates. The 
agreement of the company was that RTS will have to pay the development fee of $6 million 
wherein Anacomp would market the CIS for 5 years purely on the commission basis, along with 
having an option towards acquiring all the rights to the CIS system at the higher of its appraised 
fair value.  
In addition, the RTS’s payments towards the CIS development expenses primarily consisted of 
the loans from the Anacomp, and if the fees are in excess $6 million, Anacomp would provide 
loan them without recourse. This puts the company, shareholders and directors in a highly 
disadvantageous bearing in mind the situation wherein RTS is not able to pay back its debt.  
Question 2: How is Anacomp’s accounting influenced by the way the company organizes 
and finances its new product development?

Please use the following textbook in answering the questions: Palepu, K.G. & Healy, P.M XXXXXXXXXXBusiness Analysis and Valuation: Using Financial Statements: Using Financial Statement; Text and Cases...

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