CBA Company is engaged in producing quality cars. Its mission is to be a dominant player in car manufacturing industry in Southern Tagalog Region. You were hired as a management accountant of the...

CBA Company is engaged in producing quality cars. Its mission is to be a dominant player in car manufacturing industry in Southern Tagalog Region.

You were hired as a management accountant of the company. It has come to your attention that ABC Aluminum Inc, an aluminum manufacturer is up for sale for P 500 million. The value of net underlying assets is P 450 million, with the remaining amount was attributable to its Research and Development (R & D) department.  You also learned that aluminum is one of the materials used in car manufacturing.

The reason why ABC Aluminum came to your attention is the fact that it also throws off P 40 million in tax benefits through rapid tax depreciation of equipment.

The purchase of ABC Aluminum would be financed thru a bank with 10% annual interest.

Note: Corporate tax rate is 30%.

1. Is the acquisition of ABC Aluminum aligned with CBA's strategic plan? Explain your answer.

2. Will there be an increase in value-added? By how much? Please show your computation in good form.