Answered: Because the cost of buying higher…

Because the cost of buying higher market share through acquisition may far exceed its revenue value, what factors should be considered by the company first.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 13DQ: If an outside, perfectly competitive market exists for the intermediate product, what should the...

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If you are planning an acquisition that is motivated by trying to acquire expertise, you are basically seeking to gain intellectual capital. What concerns would you have in structuring the deal and the post-merger integration that would be different from the concerns you would have when buying physical capital?
Why might a company want to invest in a company rather than buy it outright? Wouldn't they have more say if they bought the company?
Does the successful investment decision increase a company's market value?
From a financial management perspective, when would it make sense to (a) invest in additional inventory to increase sales, and (b) invest in additional equipment to expand market share? Discuss.
a) What is a conglomerate merger and why are they more likely to be approved? b) Limit pricing is a strategy where a firm sets a low, but profitable, price to discourage entry. How does that differ from predatory pricing? c) What is "Share the gain, share the pain" theory?
Would the profit change associated with sales changes be larger or smaller if a firm increased its operating leverage?
Suppose your firm could purchase another firm for only half its replacement value.Would that be a sufficient justification for the acquisition? Explain.
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A common mistake that can occur in valuing a target would be: Group of answer choices Applying the acquirer’s growth rate in revenues to the target’s sale levels. Applying the acquirer’s cost of capital in the target’s evaluation equation. Applying the acquirer’s price-earnings ratio to the target’s earnings. All of these choices.
In the process of determining fair value, the exit price refers to: Multiple Choice the amount the firm would receive if it sold a given asset. the amount the firm would pay if it bought an asset of the same type and condition as the one being valued. the sum of the future cash flows expected to be generated by continuing to use the asset. the expected sale price of the stock in a corporate buy-out.
Which of the following LEAST accurately describes the advantages of specific types of mergers and acquisitions?a. The catch-all term for the benefits from M&As is synergy.b. A diversified group of business may further acquire other businesses in a conglomerate type of acquisition.c. The acquisition of an entity outside the industry and supporting services will result to decrease in cost of production of the acquirer.d. Financial advantages of M&A include decreased operating costs, increased financial capacity, and combined sales.
The more certain a firm is about its sales, costs, and order lead time, the closer the firm can follow the a. speculative current asset investment policy. b. restricted current asset investment policy c. relaxed current asset investment policy. d. moderate current asset investment policy.