If two merged firms are shown to have a higher combined market value than the sum of their individual market values, then:
A) economic gains are said to have taken place.
B) the firms were previously underpriced.
C) the merger provides diversification to investors.
D)there is no cost involved in the merger.

Question

Quizplus · Accepted Answer

The fact that the combined market value of the merged firms is higher than the sum of their individual market values means that economic gains have taken place. This can happen due to various reasons, such as increased efficiency, market power, economies of scale, and diversification of risks. However, it does not necessarily mean that the firms were previously underpriced, that the merger provides diversification to investors, or that there is no cost involved in the merger.

If Two Merged Firms Are Shown to Have a Higher