(a) Discuss four characteristics of a good capital budgeting technique

(b) ABC Ltd. is a company in the manufacturing sector. In the recent past, the company has faced stiff competition that has seen its market share reduce by ten percent. The management is considering acquisition as a strategy for attaining a near monopoly status. Consequently, it is contemplating acquiring XYZ Ltd. It is estimated that on successful acquisition, incremental cash flows to ABC Ltd. will be two million Kenya shillings at the end of the current period. Thereafter, incremental cash flows are expected to grow at an annual rate of 5 % each year forever. The estimated discounting rate is 12%.

Required

How much should ABC Ltd. budget for in order to successfully acquire XYZ LIMITED?