Asked by Emaree Reeves on May 19, 2024

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​Purchasing a profitable supplier increases profits only if

A) ​You pay equal to the company's discounted future profits
B) You pay higher than the company's discounted future profits
C) You pay lower than the company's discounted future profits
D) ​None of the above

Discounted Future Profits

The present value of projected future earnings from an investment, discounted back at a specified rate.

  • Assess the strategic elements in the acquisition of suppliers or customers to augment profitability.
  • Investigate the principle of synergistic benefit in the context of mergers and acquisitions.
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jessica padillaMay 22, 2024
Final Answer :
C
Explanation :
If you pay lower than the company's discounted future profits, the acquisition costs will be lower than the expected future earnings of the supplier, resulting in a positive return on investment and increased profits. Paying equal or higher than the discounted future profits would result in no gain or even losses. Therefore, the best choice is to pay lower than the company's discounted future profits.