The following information is available on the average costs of the three major banks in a given local market.Bank A has assets of $10 million and average costs are 15 percent,Bank B has assets of $20 million and average costs of 13 percent while Bank C has assets of $30 million with average costs of 12 percent.Average costs are measured as a proportion of total assets.

Bank B plans to acquire Bank A and in the process cut costs by $100,000.What is the combined bank's average costs?
A)12.00 percent.
B)12.67 percent.
C)13.00 percent.
D)13.33 percent.

Question

The following information is available on the average costs of the three major banks in a given local market.Bank A has assets of $10 million and average costs are 15 percent,Bank B has assets of $20 million and average costs of 13 percent while Bank C has assets of $30 million with average costs of 12 percent.Average costs are measured as a proportion of total assets.

Bank B plans to acquire Bank A and in the process cut costs by $100,000.What is the combined bank's average costs?

Bank B plans to acquire Bank A and in the process cut costs by $100,000.What is the combined bank's average costs?
A)12.00 percent.
B)12.67 percent.
C)13.00 percent.
D)13.33 percent.

Quizplus · Accepted Answer

The combined assets of Bank A and Bank B are $30 million. The total costs before the acquisition are $1.5 million (15% of $10 million) for Bank A and $2.6 million (13% of $20 million) for Bank B, totaling $4.1 million. After cutting costs by $100,000, the total costs become $4 million. The average cost is then $4 million divided by $30 million, which equals 13.33 percent.

The Following Information Is Available on the Average Costs of the Three