A Company Is Considering Taking Over a Firm That Has

question 70

Multiple Choice

A company is considering taking over a firm that has a very good company image.The company image cannot be assessed in financial terms and has no direct link to the change in cash flows.How can we categorize the company's image?

• A) Opportunity cost
• B) Sunk Cost
• C) Externality
• D) Intangible

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Definitions:

Ronald Coase

A British economist known for his work on transaction costs, property rights, and the theory of the firm.

Negative Externalities

Unintended and unfavourable outcomes or costs imposed on a third party not involved in a transaction or activity.

Taxes

Compulsory financial charges or some other type of levy imposed upon a taxpayer by a governmental organization.

Positive Externality

A benefit that affects a party who did not choose to incur that benefit, often leading to underproduction of the good or service in absence of intervention.