Reference no: EM132992107

Question - The following represents the performance results of A Co. & B Co. A Co. B Co. Sales $2 375 000 $775 000 Less: Variable expenses 1 500 000 325 000 Fixed expenses 375 000 300 000 Operating profit $500 000 $ 150 000 Current assets 575 000 475 000 Long-term assets 1 425 000 275 000 Total assets $ 2 000 000 $750 000 Current liabilities 350 000 212 500 Long term liability 950 000 300 000 Shareholders' equity 700 000 237 500 Total liabilities and equity $ 2 000 000 $750 000 Assume imputed interest charge of 12%.

Required -

a) Explain why Mr. Viliame may be reluctant to acquire B Co.. Show calculations to support your explanation.

b) What would you recommend to the CEO of ABC Group in terms of measuring and evaluating divisional and manager's performance, so that A Co. agrees to acquire B Co. Provide justification/calculations to support your recommendation.

c) Discuss the common issues that may arise between the divisional managers, when performance is measured using ROI.