Use the Information for the Question(s)below

question 33

Essay

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 total value of this acquisition using the APV method is equal to?

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Definitions:

Computer Reports

Documents that summarize data or findings, often generated through computer software for analysis or performance tracking.

Revenue

Revenue is the total amount of income generated by the sale of goods or services related to a company's primary operations.

Business-Hour Usage

The utilization of services, resources, or facilities during the established operational hours of a business.

Long-Distance

a term used to describe an extensive physical distance or a communication method over such distances.