| Course | MGT 576 Opportunity Evaluation and Value Creation (MGT/576) |
|---|---|
| Week | 6 |
| Paper type | Restructuring and value creation analysis |
| Length | about 1,160 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | MBA |
| Updated | October 2026 |
Free sample paper for MGT 576 Week 6
Should Prairie Mill Sell a Flour Mill to Fund Its Future? Restructuring for Value Creation
[Student Name]
University of Phoenix
MGT/576: Opportunity Evaluation and Value Creation
Week 6 Assignment
[Instructor Name]
[Date]
Prairie Mill Foods and all figures are composites written for a model paper.
Over the course, the leaders of Prairie Mill, our composite Kansas City miller, have spent their time identifying and evaluating opportunities, analyzing competitive advantage, designing a new-ventures group and planning alliances and a possible acquisition. Its plans require about $45 million over three years, more than cash flow and the family's debt limits allow. Meanwhile, its commodity flour business, more than half of revenue, earns thin margins on two mills, one of them 60 years old. Creating value sometimes requires subtracting as well as adding, and the hardest question for a family company is whether a business that defined its history still belongs in its future. This paper analyzes restructuring options.
Measuring Value Creation
Koller et al. (2020) explained that companies create value when their return on invested capital exceeds their cost of capital and when they grow at such returns. Prairie Mill's cost of capital is about 9 percent. Its baking mix business earns a return on invested capital of about 19 percent and food service about 14 percent. The newer Wichita flour mill earns about 8 percent, near the cost of capital. The older Salina mill earns about 3 percent.
What the Numbers Mean
The Salina mill destroys value: capital invested there earns far less than investors could earn elsewhere at similar risk. It also needs $12 million in upgrades within three years to meet efficiency and safety standards, and its grain storage is near the end of its useful life. The Wichita mill roughly breaks even on value and supplies the mix businesses.
Types of Restructuring
Restructuring can change the portfolio of businesses, the capital structure or the organization. Bowman et al. (1999) reviewed studies of restructuring and found that portfolio restructuring that refocused firms on core businesses tended to improve performance, while financial restructuring had mixed effects and organizational restructuring alone, such as layoffs, often did not.
Evidence on Divestitures
Lee and Madhavan (2010) found in a meta-analysis that divestitures were, on average, associated with improved performance for the divesting firm, with effects depending on how performance was measured and on the context. Selling a weak unit can free capital and management attention for stronger ones.
Option One: Keep and Upgrade Salina
Investing $12 million to upgrade Salina would raise its return to about 6 percent, still below the cost of capital, and would consume capital needed for growth.
Option Two: Convert Salina to Specialty Milling
Converting Salina to mill gluten-free and specialty grains would cost about $15 million and compete for funds with the gluten-free facility already planned. Demand for specialty flours was judged modest in Week 2. This option adds risk without clear value.
Option Three: Sell Salina With a Supply Agreement
A regional milling company has expressed interest in buying Salina for about $16 million. A long-term agreement would let Prairie Mill buy flour from the buyer for customers it cannot serve from Wichita, keeping those relationships. The sale avoids the $12 million upgrade and frees about $28 million in capital and avoided spending for growth, while the buyer, which already runs efficient mills, can operate Salina at lower cost.
Option Four: Close Salina
Closing the mill would avoid the upgrade but yield only scrap and land value, end 140 jobs in a small town and break relationships with local farmers. It is the worst option for stakeholders and for value.
Comparing the Options
Selling with a supply agreement creates the most value: it removes a value-destroying asset, funds growth businesses earning 14 to 19 percent and keeps customers. Keeping and upgrading destroys value, conversion is risky and closure harms stakeholders.
Stakeholders
The Salina mill employs 140 people and buys wheat from about 300 farmers. The sale agreement will require the buyer to retain employees for at least two years and honor existing grain contracts. Prairie Mill will offer transfers to the Wichita mill or new facility for employees who prefer to stay with the company.
Why the Wichita Mill Stays
The Wichita mill earns about its cost of capital, so on numbers alone it neither creates nor destroys much value. It stays because it supplies flour to the mix businesses, which earn far higher returns, and because owning it protects quality and supply for those businesses. Strategic links between units can justify keeping a business whose stand-alone returns are ordinary, a judgment that pure portfolio analysis can miss.
The Family's Perspective
The founder started the company at Salina, and selling it carries emotional weight. Leaders will present the analysis to the family board with the history acknowledged, showing that selling to a buyer who will keep it running honors the mill better than letting it decline.
Financial Restructuring
With the sale proceeds and avoided upgrade, Prairie Mill can fund growth with modest debt. A $15 million term loan, well within the family's limits, would cover the rest of the $45 million plan, keeping debt below two times operating earnings.
Where the Capital Goes
The restructuring frees capital for specific uses with expected returns: about $18 million for the gluten-free facility, $3 million for custom mix equipment, up to $26 million for the brand acquisition if the price is right, $2 million for regenerative sourcing and $900,000 a year for the new-ventures group. Each of these is expected to earn well above the 9 percent cost of capital, while the Salina upgrade would have earned about 6 percent. Moving capital from the lowest-return use to the highest is the core of value creation.
Timing and Execution
The sale will take about nine months, including due diligence and regulatory review. Prairie Mill will announce it to employees and farmers before any public statement, explain the job and contract protections and meet each farmer supplier personally. Customers served from Salina will be told about the supply agreement in advance so that no deliveries are interrupted.
Risks of the Sale
Risks include the buyer failing to honor job commitments after two years, customer concerns about flour quality from the new owner and the family's discomfort. The supply agreement includes quality standards, and the sale contract includes enforceable employment terms with penalties.
Organizational Restructuring
The company will reorganize into two divisions, a milling division focused on efficiency at Wichita and a mixes and new ventures division focused on growth, each with its own leadership and measures, under a shared chief executive.
Reflecting on the Course
The course traced value creation from identifying opportunities through evaluating them, building advantage, organizing for entrepreneurship and using alliances and acquisitions. Restructuring completes the picture by freeing the resources that growth requires.
Conclusion
Prairie Mill's Salina mill earns well below its cost of capital and needs costly upgrades. Selling it with a supply agreement and job protections creates value, funds growth businesses that earn high returns and treats stakeholders fairly. Combined with modest debt and a two-division structure, restructuring turns the course's opportunities into a funded plan.
References
Bowman, E. H., Singh, H., Useem, M., & Bhadury, R. (1999). When does restructuring improve economic performance? California Management Review, 41(2), 33-54. https://doi.org/10.2307/41165985
Koller, T., Goedhart, M., & Wessels, D. (2020). Valuation: Measuring and managing the value of companies (7th ed.). Wiley.
Lee, D., & Madhavan, R. (2010). Divestiture and firm performance: A meta-analysis. Journal of Management, 36(6), 1345-1371. https://doi.org/10.1177/0149206309360931
What the MGT 576 Week 6 instructions ask
MGT 576 ends with a prompt on restructuring: which options could raise the organization's value and why. Common requirements include measuring value creation by business unit, types of restructuring such as portfolio, financial and organizational, evidence on restructuring outcomes, evaluation of specific options such as divestiture, spin-off or reorganization, effects on stakeholders and a recommendation linked to the company's strategy. Many instructors also want a short look back over the whole course. Use return on invested capital or similar measures, weigh options with numbers and with their effects on people and communities, and list sources in APA format. A table comparing options on value, risk and stakeholder impact is often helpful.
How this MGT 576 Week 6 example is built
A family company that earns 4 percent returns on capital in commodity flour while its mix businesses earn far more must ask whether to keep everything, and the paper analyzes the choice. Return on invested capital by business shows that one of two flour mills destroys value. Research finds that restructuring helps most when it refocuses a company and that divestitures often improve performance. Options include selling the older mill, converting it to specialty production or signing a long-term supply agreement with a larger miller. The paper evaluates each, considers employees and farmers and recommends selling the older mill to a regional buyer with a supply agreement and job protections, then shows how the freed capital funds the growth plan.
MGT 576 Week 6 grading rubric: where the points go
Strong restructuring papers measure value creation carefully and evaluate options against both financial and stakeholder criteria. Faculty credit use of return on invested capital compared with the cost of capital, accurate use of research on restructuring and divestitures, a fair comparison of options with numbers, attention to employees, communities and partners and a recommendation that fits the organization's strategy and ownership. Connecting restructuring to the growth opportunities developed earlier in the course demonstrates integration. Tables and APA references complete the paper. Credit also goes to recommendations that protect people affected by restructuring, such as employment commitments from a buyer, because value created by harming communities often returns as reputational and relationship costs, especially for a family company whose name is tied to the region.
MGT 576 Week 6 help: mistakes to avoid
Students often recommend selling or closing a business based on low profits alone. Compare returns with the cost of capital and consider strategic links. Another frequent gap is ignoring stakeholders affected by restructuring. Address employees, suppliers and communities. Students also treat restructuring as only cost cutting. Explain how it frees resources for growth. Avoid recommendations that conflict with ownership goals without addressing them. Show the numbers. Consider alternatives such as partnerships. Finally, connect the final paper to earlier weeks, since restructuring is often what pays for new opportunities. Show where the freed capital will go and what return it is expected to earn.
Related MGT 576 sample papers
Other MGT 576 week samples
- MGT 576 Week 1: Opportunity Identification
- MGT 576 Week 2: Evaluating Opportunities
- MGT 576 Week 3: Analyzing Competitive Advantage
- MGT 576 Week 4: Corporate Entrepreneurship
- MGT 576 Week 5: Alliances and Acquisitions
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MGT 576 Week 6 questions, answered
What does MGT 576 Week 6 usually cover?
It usually covers restructuring and value creation: measuring returns by business, portfolio, financial and organizational restructuring, evidence on outcomes, evaluating options such as divestiture and stakeholder effects.
Where can I find a free MGT 576 Week 6 sample paper?
This page presents a complete restructuring analysis for a family milling company, with return calculations and notes. A free draft of your final MGT 576 paper can be requested.
How do you know if a business unit creates value?
Compare its return on invested capital with the cost of capital. A unit whose returns stay below that hurdle year after year lowers the company's value even while reporting accounting profits.
Do divestitures improve company performance?
Research suggests that divestitures are, on average, associated with improved performance for divesting firms, especially when they refocus the company on its core strengths.
What are the main types of restructuring?
Portfolio restructuring changes which businesses a company owns, financial restructuring changes its capital structure and organizational restructuring changes its structure, processes and staffing.
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