Which of the following benefits of diversification explains the idea that corporate diversification can provide situations where an acquiring firm determines the stock price for firm they intend to acquire is too low?
A)Use of internal capital markets
B)Economies of scale and scope
C)Economizing on transaction costs
D)Diversifying shareholder portfolios
E)Identifying undervalued firms

Question

Quizplus · Accepted Answer

Identifying undervalued firms allows the acquiring firm to potentially purchase the target company at a lower stock price, providing a financial benefit to the acquiring company.

Which of the Following Benefits of Diversification Explains the Idea