What are the benfit of diversification in a congiomerate marger? Increased profi

Question

What are the benfit of diversification in a congiomerate marger? Increased profit and decreased costs Economies of scale and economies of scope Risk reduction, lower cost of debt, and increase liquidity Lwer cost of debt, increase profits, and increase debt capacity Question 11 Corporation can purchase insurance as a mean of reducing their risks. What are the primary limitations on the extent to which increase can reduce the risks faced by a corporation? What is the free problem that can result from a merger?

Explanation / Answer

10. Risk reduction, lower cost of debt and increased liquidity

11. Insurance is often required to insured by law, and the assumption is when any risk happaned like fire or any major damage to the goods, the loss will be minimized.

12. Free riding in Mergers will reflect on share prices of the company, the assets value will be undercalculated and the share prices are quoted much lesser price than its market or fair price. At the end it resulted with devaluation of the company

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