Assume a Merger of Two Unlevered Firms Produced No Synergy

question 56

Multiple Choice

Assume a merger of two unlevered firms produced no synergy.In this case:

• A)the acquiring firm's shareholders would gain while the acquired firm's shareholders would lose.
• B)the shareholders of both firms would realize equal gains.
• C)the diversification effect would only benefit the acquired firm's shareholders.
• D)the acquired firm's shareholders would gain at the expense of the acquiring firm's shareholders.
• E)all shareholders would fail to realize any benefits.

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Definitions:

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than competitors, leading to more efficient trade.

Intensive

Refers to a method or approach focusing deeply on a specific area or aspect, often requiring a high degree of effort or concentration.

Abundant

Available in large quantities; more than sufficient; plentiful.

Comparative Advantage

The ability of an individual or group to carry out a particular economic activity (such as making a specific product) more efficiently than another activity.