Recovering the Acquisition Cost. The long-run average cost of production is constant at $6 per unit. Suppose firm X acquires Y at a cost of $24 million and increases the price to $14. At the new price, X sells 1.5 million units per year. (Related to Application 4 on page 611.)
a. How does the acquisition affect X s annual profit?
b. How many years will it take for X to recover the cost of acquiring Y?