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.
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Why would a company be more enthusiastic in providing more training to its workers during an economic downturn than during an economic boom (assuming that they do not layoff their workers and can keep them when the economy recovers)?
What will be an ideal response?
You may consume ice cream or frozen yogurt, and ice cream consumption is plotted along the horizontal axis of your indifference map. The prices are denoted PY for frozen yogurt and PIC for ice cream
Under what condition will you only consume frozen yogurt? A) MRS is greater than PIC/PY B) MRS is less than PIC/PY C) MRS is less than PY/PIC D) MRS is infinite