Calculation of Change in HHI Associated with a Merger Consider

question 21

Multiple Choice

Calculation of Change in HHI Associated with a Merger Consider a market that has three firms with the following market shares:
Firm A 25 percent
Firm B 55 percent
Firm C 20 percent
Suppose Firm A wants to acquire Firm C so that the post-acquisition market would exhibit the following shares:
A + C = 45 percent
B = 55 percent
What is the change in the HHI resulting from the merger?

• A)1,000
• B)4,050
• C)5,050
• D)No change

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Definitions:

Straight-Line Method

A technique for computing depreciation that involves uniformly distributing an asset's cost throughout its lifespan.

Salvage Value

The anticipated concluding value of an asset at the expiration of its operational period.

Commercial Substance

A concept in accounting that a transaction has commercial substance if it significantly changes the economic position or cash flows of the company.

Construction Cost

Expenses incurred in the building of physical structures, including materials, labor, and overhead costs.