Use the Information for the Question(s)below

question 45

Multiple Choice

Use the information for the question(s) below.
Suppose that Rose Industries is considering the acquisition of another firm in its industry for $100 million.The acquisition is expected to increase Rose's free cash flow by $5 million the first year,and this contribution is expected to grow at a rate of 3% every year thereafter.Rose currently maintains a debt to equity ratio of 1,its corporate tax rate is 21%,its cost of debt rD is 6%,and its cost of equity rE is 10%.Rose Industries will maintain a constant debt-equity ratio for the acquisition.
-Rose's unlevered cost of capital is closest to:

• A)8.0%.
• B)7.5%.
• C)7.0%.
• D)9.0%.

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Definitions:

Poor Self-esteem

A condition where an individual holds a low or negative self-assessment of their worth or abilities.

Intrapersonal

Pertaining to phenomena or factors occurring within an individual's mind.

Vicarious Reinforcement

Vicarious reinforcement refers to the process of increasing the likelihood of a behavior by observing others being rewarded for that behavior, a concept used in social learning theory to explain how people learn from observing others.

Behavior

The actions or reactions of an individual, group, or system in response to external or internal stimuli.