After long deliberations, the CEO of The Magic Mirror Ltd decided to buy a small company that would provide another level in achieving the vertical integration objective that he planned for the company. He borrowed $5 million with the expectation of Earnings Before Interest and Tax of $1,400,000 per annum. However, he had not expected a pandemic to affect his business plans and the EBIT figure for the year was only 50% of his projected figure. The borrowing cost is 5% pa and the tax rate is 25%. The company has 5 million shares issued at a cost of $1 per share. Retained earnings are $2 million and Reserves are $1 million. Required: (i) Calculate the expected ROE of the purchase of the other company and the ROE based on the impact of the pandemic. (ii) Assume that you were consulted prior to the pandemic, prepare a note to the Board of Directors about the issues to consider when contemplating a takeover or expansion of a business