question archive A company raises € 500m in shareholders" equity for an R&D project
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A company raises € 500m in shareholders" equity for an R&D project. Has it become richer or poorer? By how much? What is your answer if the company spends half of the funds in the first 2 years, and the project does not produce results? In the 3rd year, the company uses the remaining funds to acquire a competitor that is overvalued by 25%. But, thanks to synergies with this new subsidiary, it is able to improve its earnings by €75m. Has it become richer or poorer? By how much?
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