If the Markets Are Not Perfect, but Only Efficient, in Which

question 56

Multiple Choice

If the markets are not perfect, but only efficient, in which of the following scenarios would a merger of two companies be most likely to create value?

• A)Although Company B is in an unrelated industry, the CFO of Company A has done a thorough analysis and has identified Company B as an extremely undervalued company.
• B)Company A is in a completely different industry from Company B, so the merger would provide diversification benefits.
• C)Company B is one of Company A's suppliers, and the merger would allow Company A to obtain supplies more cheaply than Company A's competitors can.
• D)A merger of the two companies would create value in all of the above scenarios.

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Definitions:

Mormon Followers

Members of The Church of Jesus Christ of Latter-day Saints, a religious group known for their unique beliefs in Christianity, founded by Joseph Smith in the early 19th century.

Utah

A state in the western United States known for its vast expanses of desert, the Wasatch Range of mountains, and the Great Salt Lake, as well as its significant Mormon community.

Corporations

Legal entities recognized by law that can acquire liabilities and assets, enter into contracts, and are formed to conduct business activities.

Free Agent

An individual who is free to make decisions and act independently, often used in the context of professional sports to describe players who are not bound by contracts to any team.