chap021solutions - Solutions for Chapter 21 Mergers,...

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Solutions for Chapter 21 Mergers, Acquisitions and Corporate Control 1. a.Merging to achieve economies of scale makes economic sense. b. Merging to reduce risk by diversification does not make economic sense. Shareholders can diversify for themselves. c. Merging to redeploy cash might make economic sense, but note that there are other ways to redeploy excess cash besides using it to purchase another firm. d. Merging to increase earnings per share does not make economic sense. 2. The firms can benefit from operational efficiencies. Heating will be busier in the winter, Air Conditioning in the summer. By merging, the firms can even out the workload over the year and use their resources at full capacity. 3. a.True. b. False. c. True. d. True. e. Largely false. While there are some gains from mergers, they do not seem to be ‘substantial.’ f. False. In a tender offer, the acquirer ‘goes over the heads’ of management directly to the shareholders. g.
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chap021solutions - Solutions for Chapter 21 Mergers,...

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