Which of the Following Is Likely to Happen Due to Horizontal

question 85

Multiple Choice

Which of the following is likely to happen due to horizontal mergers between competitors such as Delta and Northwest airlines?

• A) The overall industry profitability will increase.
• B) The threat of strong competitive forces such as supplier power will increase.
• C) The industry will face excess capacity in the future.
• D) The structure of the industry will change from consolidated to one that is fragmented.

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Definitions:

IRR

In capital budgeting, the Internal Rate of Return serves as a tool for estimating the potential returns on investment projects.

Investment

The allocation of resources, usually money, into assets or projects expected to generate future returns or profit.

Profitability Index

A calculation that measures the relative profitability of an investment by dividing the present value of future cash flows by the initial investment cost.

Discount Rate

This rate is applied in discounted cash flow analysis to derive the current value of cash flows expected to be received in the future.