1.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).

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

b.Would ABC's shareholders be in favor?Explain. (15 points)

3. ABC rewards it's 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). a. Would ABC's managers be in favor of this purchase? Explain b. Would ABC's shareholders be in favor? Explain. (15 points)