=4. Your firm is considering the acquisition of a very promising Internet company. One executive argues against
Question:
=4. Your firm is considering the acquisition of a very promising Internet company. One executive argues against the move, pointing out that because the Internet company is presently losing money, the acquisition will cause your firm's return on equity to fall.
a. Is the executive correct in predicting that ROE will fall?
b. How important should changes in ROE be in this decision?
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