Use the Information for the Question(s)below

question 66

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.
-The unlevered value of Rose's acquisition is closest to:

• A)$63 million.
• B)$50 million.
• C)$167 million.
• D)$100 million.

---

Definitions:

Electroencephalogram

A test that measures electrical activity in the brain using small, flat metal discs attached to the scalp.

Neural Activity

The functioning of neurons, including the transmission of electrical and chemical signals within the brain and nervous system.

Electrodes

Conductive materials or devices used to make electrical contact with a nonmetallic part of a circuit, often used in scientific experiments.

Reticular Activating System

A network of neurons located in the brainstem that plays a crucial role in regulating wakefulness and sleep-wake transitions.