A survey of a local market has provided the following average cost data: Johnson Construction Corporation...

 

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A survey of a local market has provided the following average cost data: Johnson Construction Corporation (JCC) has assets of $3 million and an average cost of 19 percent. Anderson Architects (AA) has assets of $12.0 million and an average cost of 37 percent. Cole Home Builders (CHB) has assets of $4 million and an average cost of 26 percent. For each firm, average costs are measured as a proportion of assets. JCC is planning to acquire AA and CHB with the expectation of reducing overall average costs by eliminating the duplication of services. a. What should the average cost after the acquisition be for JCC to justify this merger? b. If JCC plans to reduce operating costs by $400,000 after the merger, what will the average cost be for the new firm? Note: For all requirements, round your answers to 2 decimal places. a. Average cost b. Average cost % % A survey of a local market has provided the following average cost data: Johnson Construction Corporation (JCC) has assets of $3 million and an average cost of 19 percent. Anderson Architects (AA) has assets of $12.0 million and an average cost of 37 percent. Cole Home Builders (CHB) has assets of $4 million and an average cost of 26 percent. For each firm, average costs are measured as a proportion of assets. JCC is planning to acquire AA and CHB with the expectation of reducing overall average costs by eliminating the duplication of services. a. What should the average cost after the acquisition be for JCC to justify this merger? b. If JCC plans to reduce operating costs by $400,000 after the merger, what will the average cost be for the new firm? Note: For all requirements, round your answers to 2 decimal places. a. Average cost b. Average cost % %

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To solve this problem we need to calculate the weighted average cost of the combined firm after the ... View the full answer