Your firm is considering acquiring a smaller company. The products and markets fit well within your organizations strategy. This potential acquisition is a high-tech company that is presently losing money. Some in your organization argue that the acquisition is not a good idea since the high-tech company is losing money and this will cause your firms return on equity to decrease.

• Are the naysayers correct? Will your ROE decrease? Why?
• How important are changes in ROE when considering an acquisition?