The Shackled Foot Corporation is a conglomerate with four major divisions. Each division has performed poorly over the years and none has a return greater than 2 percent. Karen, who could have invested her money at 5 percent, buys the company. What does her action imply?
Karen must believe that the divisions are capable of returning a rate greater than 2 percent. In fact, she must believe that the company as a whole will be worth more than a 5 percent rate of return. We have no way of knowing the specific motivations behind Karen's purchase. Perhaps she thinks the company is being managed inefficiently. Or it may be that she believes the component divisions are worth more separately than as a unit and plans to sell them separately.
You might also like to view...
When a firm has the power to establish its price
A) P = MR. B) P = MC. C) P > MR. D) P < MR.
The marginal product curve rises when the marginal cost curve rises
a. True b. False Indicate whether the statement is true or false
Exporting a good at a price below its cost of production is defined as
a. efficiency b. dumping c. diversification d. retaliation e. tariffs
Refer to Exhibit 2-9. For Adam, the opportunity cost of producing one unit of good B is ____________ unit(s) of good A
 ANSWER 5.png)