Which of the Following Benefits of Diversification Explains the Idea

question 27

Multiple Choice

Which of the following benefits of diversification explains the idea that corporate diversification can provide situations where an acquiring firm determines the stock price for firm they intend to acquire is too low?

• A)Use of internal capital markets
• B)Economies of scale and scope
• C)Economizing on transaction costs
• D)Diversifying shareholder portfolios
• E)Identifying undervalued firms

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Definitions:

Excess Supply

a situation where the quantity of a good or service supplied in a market exceeds the quantity demanded at the current price, leading to downward pressure on the price.

Property Rights

Legal rights to possess, use, and dispose of assets including real estate, intellectual property, and tangible goods.

Economic Efficiency

A measure of how well scarce resources are utilized for producing goods and maximising the satisfaction or utility of consumers.

Market Equilibrium

A condition where the supply and demand in the market equilibrate, leading to stable prices.