In an unrelated acquisition, if 5 firms are interested in acquiring a firm and each of the bidding firms had a current market value of $30,000 while the current market value of the target firm is $20,000, this acquisition is likely to generate economic profits of ________ for the acquiring firm.
A) $10,000
B) $20,000
C) $50,000
D) $0.00

Question

Quizplus · Accepted Answer

In an unrelated acquisition, the acquiring firm is not expected to generate economic profits because the acquisition does not create synergies or efficiencies that would increase the combined firm's value beyond the sum of the separate entities. Therefore, the economic profit is likely to be $0.00.

In an Unrelated Acquisition, If 5 Firms Are Interested in Acquiring