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BIG INC rewards its managers on (before tax) Return on Assets (ROA). BIG INC has...

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Finance

  1. BIG INC rewards its managers on (before tax) Return on Assets (ROA). BIG INC has revenues of $100m, and expenses (including interest expense) of $82m. Total assets are $90m. BIG INCs weighted average cost of capital is 12%. BIG INC is considering buying TALL Inc., which has revenues of $15m, assets of $10m, and expenses of $14m (including interest expense).

  1. Would BIG INCs managers be in favor of this purchase? Explain
  2. Would BIG INCs shareholders be in favor? Explain.

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