2. 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 in the next year (year 1), and this increase is expected to grow at a rate of 3% every year thereafter (g=3%). Rose currently maintains a debt to equity ratio of 1, its tax rate is 40%, its cost of debt rp is 6%, and its cost of equity rE is 10%. Rose Industries will maintain a constant debt-equity ratio for the acquisition project, and the cost of capital for the acquisition project is assumed to be equal to firm's cost of capital (a) What is Rose's unlevered cost of capital? (b) What is the unlevered value of Rose's acquisition project? (c) Given that Rose issues new debt of $65.8 million initially to fund the acquisition, what is the present value of the interest tax shield for this acquisition (think about the pattern of project's remaining value evaluated at each year)? What is the total value of this acquisition using the APV method