An Unrelated Diversification Strategy Can Create Value Through Two Types

question 61

True/False

An unrelated diversification strategy can create value through two types of financial economies: (1) efficient internal capital allocations and (2) purchasing other firms, restructuring their assets, and selling them.

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Definitions:

Economic Efficiency

A state where resources are allocated in a way that maximizes the production of goods and services.

External Cost

Uncompensated costs that individuals or firms impose on others outside of market transactions, often associated with pollution.

Pollution Tax

A financial charge imposed on the emission of pollutants, intended to motivate reductions in harmful environmental discharges.