The Primary Purpose of a Conglomerate Merger Is

question 52

Multiple Choice

The primary purpose of a conglomerate merger is

• A) to achieve economies of scale available through increased production of a single good.
• B) to allow for decentralized management by spreading authority of a number of people spread throughout company locations.
• C) to avoid adverse effects of business cycles through diversification.
• D) to reduce competition by purchasing and then closing competing firms.

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Definitions:

Net Present Value (NPV)

The variance between the current value of incoming cash and the current value of outgoing cash throughout a specific duration.

Internal Rate of Return (IRR)

The discount rate that makes the net present value (NPV) of all cash flows from a particular project zero.

Net Present Value (NPV)

A calculation that compares the value of all cash inflows and outflows of a project or investment using a discount rate, to determine the project’s profitability.

Internal Rate of Return (IRR)

A method of calculating an investment's rate of return that makes the net present value of all cash flows equal to zero.