One Indication That Investors Expect No Synergy from a Merger

question 87

Multiple Choice

One indication that investors expect no synergy from a merger would be that:

• A)Total market value of the merged firms does not change
• B)The P/E ratio of the merged firms changes
• C)The acquiring firm financed the merger with cash
• D)The merged firms are from different industries

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Definitions:

Market Equilibrium

A state where the supply of a product matches its demand, resulting in stable prices.

Quantity Demanded

The aggregate quantity of a product or service that buyers are prepared to buy at a given price.

Excess Supply

A situation where the quantity of a product offered for sale by producers exceeds the quantity that consumers are willing to buy at a given price.

Quantity Supplied

The total amount of a specific good or service that producers are willing and able to sell at a particular price over a given period of time.