The Cost of a Merger May Outweigh the Potential Gain

question 39

Multiple Choice

The cost of a merger may outweigh the potential gain if the:

• A) present value of the acquired firm exceeds the price paid for it.
• B) present value of the merged firms is greater than the sum of their individual values.
• C) merger allows cost savings to occur.
• D) acquired firm's shareholders receive more than the value of their firm.

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Definitions:

Marginal Product

The supplementary yield obtained from utilizing an additional unit of a specific input, assuming all other inputs remain constant.

Labor Supply Curve

A graphical representation showing the relationship between the quantity of labor that workers are willing to offer and the wage rate.

Opportunity Cost

Opportunity cost represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Marginal Product

The additional output resulting from using one more unit of a particular input, holding other inputs constant.