$3.$ XYZ completed a major acquisition in $2019$ in order to enhance its market power. The CEO commented that the acquisition would $$substantially boost XYZ$$s sales through enhanced product market competitiveness, and deliver value to the shareholders by generating significant growth opportunities$.$ Selected company financials for the subsequent years are presented below.

Company XYZ $201920202021$

Income Statement Data $($million $$)$

Sales $500\mathrm{.}0600\mathrm{.}0700\mathrm{.}0$

EBIT $150\mathrm{.}0168\mathrm{.}0182\mathrm{.}0$

Interest expense $12\mathrm{.}517\mathrm{.}123\mathrm{.}3$

Pretax Income $137\mathrm{.}5150\mathrm{.}9158\mathrm{.}7$

Income taxes $55\mathrm{.}060\mathrm{.}363\mathrm{.}5$

Net income $82\mathrm{.}590\mathrm{.}595\mathrm{.}2$

Balance Sheet Data $($million $$)$

Working capital $50\mathrm{.}072\mathrm{.}0105\mathrm{.}0$

Fixed assets $575\mathrm{.}0785\mathrm{.}11061\mathrm{.}7$

Total assets $625\mathrm{.}0857\mathrm{.}11166\mathrm{.}7$

Debt $208\mathrm{.}3285\mathrm{.}7388\mathrm{.}9$

Shareholders' equity $416\mathrm{.}7571\mathrm{.}4777\mathrm{.}8$

Stock price $($year$-$end$)$ $$30$ $$26$ $$22$

Number of shares outstanding $($million$)202020$

Expected return $20\%20\%20\%$

a$.$ Please calculate XYZ$$s earnings per share $($EPS$),$ price$-$to$-$earnings $($P$/$E$)$ ratio, and the present value of growth opportunity $($PVGO$)$ for the three years. Based on the numbers, please evaluate whether the acquisition in $2019$ met the CEO$$s expectations.

b$.$ Analyze the company$$s financials and discuss XYZ$$s ROE trend over time. Please perform a Du Pont analysis and identify the main source$($s$)$ of challenges faced by XYZ$.$

c$.$ Assume that XYZ increased its Assets$/$Equity ratio to $2\mathrm{.}5$ in $2021$ by issuing more debt and all other ratios in the Du Pont analysis remained unchanged. How would this change have affected its ROE for $2021?$