A Merger Is Expected to Produce Cost Savings of $50

question 19

Multiple Choice

A merger is expected to produce cost savings of $50 million and the acquired firm's shareholders will receive a premium of 20% over the $150 million value of their firm.The gain of the merger to the acquirer is:

• A) $20 million.
• B) $30 million.
• C) $50 million.
• D) $130 million.

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Definitions:

Price Discrimination

The strategy of selling the same product to different customers at different prices based on their willingness to pay.

Market Segmentation

The process of dividing a broad consumer or business market, normally consisting of existing and potential customers, into subsets of consumers (known as segments) based on some shared characteristics.

Monopoly Power

The market dominance of a single supplier, often characterized by the ability to control prices and exclude competition.

Price Discriminate

The strategy of selling the same product to different customers at different prices based on willingness to pay, market segment, or conditions.