Chano8523
Chano8523
04.07.2020 • 
Business

If firm 'A' (worth $750,000 by itself) acquires firm 'B' at an acquisition cost of $200,000 (paying zero premium) and claims to be able to extract $25,000 in annual economies of scope, then which of the following market values is the best approximation of a value that reflects a market belief that firm 'A' actually can extract at least $25,000 in annual economies of scope? In other words, what will the new combined value of firms 'A' and 'B' be AFTER firm 'A' acquires firm 'B' and successfully convinces the market they have achieved the $25,000 of economies of scope? (Assume a WACC of 5.4% for all firms involved both before and after the acquisition).a. $687,963b. $3,703,704c. $950,000d. $1,21,963e. $975,000f. $951,350g. $662,963h. $1,950,400i. $1,412,963j. $462,963

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