1. Anker Inc. is a listed company in New York. Its current before interest after-tax operating cash flow is $100 million. The cash flow is expected to grow at 6% per annum over the next three years, after which the growth will fall to 3% per annum and stay at this rate forever. The following information is also available:

Tax rate	30%
Risk-free rate	4%
Market return	12%
Equity beta	2
Cost of debt	7%
D/E	60%

Using the free cash flow methodology, the value of Anker Inc. is around:

	A.	Not enough information to calculate
	B.	$982 million
	C.	$717 million
	D.	$1,531 million

Firm A has a value of $500 million and Firm B has a value of $300 million. Firm A has 1000 shares outstanding, and Firm B has 800 shares outstanding. Suppose that the merger would increase cash flows of the combined firm by $5 million in perpetuity. Assuming the cost of capital for the new firm is 5%. Assume that Firm A purchases Firm B for $330 million. How much do Firm A's shareholders gain from this merger?

	A.	$30 million
	B.	$70 million
	C.	$20 million
	D.	$15 million
	E.	None of the above