Utara Corporation and Selatan Company are competitors in the business of electrical components distribution. Selatan is the smaller firm and has attracted the attention of the management of Utara, for Selatan has taken away market share from the larger firm by increasing its sales force over the past few years. Utara is considering a takeover offer for Selatan and asked you to serve on the acquisition valuation team that will turn into due diligence team if an offer is made and accepted. Given the financial information and proposal assumptions that follows, how would you respond to (a) and (b)? Revenues Less: Cost of goods sold Equals: Gross profits Less: SG&A expenses 41.10 Less: Depreciation expense 7.30 36.80 6.70 Selatan Company Condensed Income Statement Previous five years (in RM million) 2017 2016 2020 2019 2018 1,626.50 1614.10 1485.20 1380.50 1373.40 1,488.10 1490.90 1359.50 1271.40 1268.00 138.40 123.20 125.70 109.10 105.40 41.20 35.00 36.10 7.10 6.60 6.40 Less: Operating expenses 48.40 43.50 48.30 41.60 42.50 Equals: Operating income 90.00 79.70 77.40 67.50 62.90 Less: Interest expense 11.50 12.00 12.00 12.00 12.00 Equals: Earnings before 78.50 67.70 65.40 55.50 50.90 taxes Less: Taxes paid (31%) 24.30 20.80 19.90 16.80 15.30 Equals: Net Income 54.20 46.90 45.50 38.70 35.60 + Selatan Electrical Company Condensed Balance Sheet for the Year 2020 (RM million) Current Asset 12.20 Plus: Fixed Asset 347.80 Equals: Total Asset 360.00 Current liabilities Plus: Long Term debt Equals: Total Liabilities Plus: Shareholders' equity Total Liabilities and equity 10.10 150.00 160.10 199.90 360.00