Sales 500m

Operating margin 10%

Debt 200m

Equity 300m

Interest cost 5%

Tax rate 20%

Unlevered historic beta 0.6

Depreciation charge of 20m

100m shares outstanding

Risk free rate = 2% market premium = 7%

The Company is considering making and acquisition: :

Cost 50m

EBIT 6m

Tax 20% and all other financial details consistent with above (note: Depreciation ratio is assumed to remain the same)

How does ROIC compare with WACC?

What non-financial considerations go into deciding whether to

go ahead?

What will the impact on EPS be if the acquisition is debt funded?

What is the EV/EBITDA and EV/EBIT of this acquisition

Assume the acquisition is 50% funded with a rights issue at a 30%

discount to the current share price