Question 25 Not yet saved Gutho Lid, is currently considering undertaking the acquisition of one of or possibly both of two alternative companies (Browny Led, and Marked out of Jenning Lid.) to further broaden its insurance offerings, Both of these companies have recently indicated that they wish to cease operations. Details of each company's current performance is provided below. Y Flag question Gutho Ltd. Browny Lid. Jenning Ltd. Sales $2,500,000 $1,300,000 $1,350,000 Variable costs 70% of sales 65% of sales 60% of sales Fixed costs $550,000 $350,000 $340,000 Invested capital $1,250,000 $550,000 $1,000,000 If Gutho Ltd, acquires Browny Led. it would expect to increase its current profit level by 20% and would require an additional capital investment of $260,000. If Gutho Ltd. acquires Jenning Ltd. it would expect to increase its current profit level by 20% and would require an additional capital investment of $120,000. Gutho Ltd. has a minimum required rate of return of 15%. Should Gutho Ltd. undertake the acquisition of Browny Led and / or Jenning Ltd? Explain your answer and provide supporting Return on investment and Residual income calculations. (8 marks)