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Would abcs managers be in favor of this purchase

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Reference no: EM132927850

Question - ABC rewards its managers on (before tax) Return on Assets (ROA). ABC has revenues of $100m, and expenses (including interest expense) of $82m. Total assets are $90m. ABC's weighted average cost of capital is 12%. ABC is considering buying XYZ Inc., which has revenues of $15m, and expenses of $14m (including interest expense).

Required -

a. Would ABC's managers be in favor of this purchase? Explain

b. Would ABC's shareholders be in favor? Explain.

Reference no: EM132927850

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