Question

Bank 1, with $130 million in assets and $20 million in cost, acquires Bank 2 ,which has $50 million in assets and $10 million in costs. After the acquisition, the bank has $180 million in assets and $35 million in costs. Did this acquisition produce economies of scale or economies of scope? Explain? ( 4 point)

Answer 1

No this acquisition do not produce econamies of scale or scope

Explanation) econamies of scale or scope is reduction in costs or increase in revenue due to synergy of combining

Combined assets before acquisition = (130+50)= 180

Combined coats before acquisition = 10+20 = 30

After aquisition

Asset are 180 and coats are 35

Here after acquisition cost of increased by 5 million so there is no positive effect of acquisition. So this does not produce econamies of scale or scope