Use the Information for the Question(s)below

question 28

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.
-Given that Rose issues new debt of $50 million initially to fund the acquisition,the present value of the interest tax shield for this acquisition is closest to:

• A)$24 million.
• B)$50 million.
• C)$20 million.
• D)$15 million.

---

Definitions:

JavaBean

A reusable software component that follows specific conventions: it must be serializable, have a no-argument constructor, and allow access to properties using getter and setter methods.

Programming Technique

A method or approach used in software development to solve problems or accomplish tasks.

Sockets

Endpoints for sending and receiving data across a network, allowing for communication between different processes or systems.

JavaBean Model

A reusable software component model in Java that allows the creation and manipulation of reusable components.