How to determinate economies of scale can be reached with the added locations?

What is a reasonable price you are willing to pay for the acquisition, assuming you want to earn a 20% return?

 

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SCENARIO You own a small H&R Block franchise office and has received an offer to purchase four more locations. Each location is similar in size and expenses. First review the expenses to determine what are the fixed and variable costs. Second determine if any economies of scale can be reached with the added locations. Third determine the profitability of the added locations. Finally, assuming you want to earn a 20% return, what is a reasonable price you are willing to pay for the acquisition. SCENARIO You own a small H&R Block franchise office and has received an offer to purchase four more locations. Each location is similar in size and expenses. First review the expenses to determine what are the fixed and variable costs. Second determine if any economies of scale can be reached with the added locations. Third determine the profitability of the added locations. Finally, assuming you want to earn a 20% return, what is a reasonable price you are willing to pay for the acquisition.

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DETERMINATION OF ECONOMIES OF SCALE Economies of scale is the cost advantage experienced by a Firm w... View the full answer