Alliance Chemicals recently acquired Swenson Industries in a transaction that produced a NPV of $1.3 million.This NPV is referred to as:
A)the agency effect.
B)the consolidating value.
C)diversification.
D)the consolidation effect.
E)synergy.

Question

Quizplus · Accepted Answer

The NPV of $1.3 million in the acquisition transaction suggests that the Alliance Chemicals and Swenson Industries' combined value is greater than the sum of their individual values. This is commonly referred to as synergy, where the two companies' strengths complement each other, leading to increased efficiency, economies of scale, and profitability. Therefore, the correct answer is E. The agency effect refers to the impact of conflicts of interest between principals and agents in a business relationship. Consolidating value and the consolidation effect are not relevant in this context, and diversification refers to the strategy of spreading investments across different assets to minimize risk.

Alliance Chemicals Recently Acquired Swenson Industries in a Transaction That