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:

Mexican Peso

The official currency of Mexico, symbolized as $ or MXN.

Direct Investment

In international business, building facilities in another country.

Significant Facilities

Important physical buildings, plants, or other structures owned or used by a business to carry out its operations.

Swiss Franc

The official currency of Switzerland and Liechtenstein, known for its stability and often considered a "safe-haven" currency.