Managers typically make portfolio decisions based on a series of logical justifications. The choice to invest, cut back, buy, or exit is ideally guided by the strength of a business’s structural attractiveness (business logic); the potential to improve the business or create synergy with other businesses (added-value logic); and the state of the capital markets—whether they are likely to over- or under-value the business relative to the net present value, or NPV, of its future cash flows (capital-markets logic).

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