3. Merger valuation and discounted cash flows Aa Aa When an acquirer assesses a potential target, the price the acquirer is willing to pay should be based on the value of: O The target firm's debt O The target firm's equity O The target firm's total corporate value (debt and equity) Consider the following scenario: Water and Power Co. (W&P) is considering an acquisition of Zebra Engineering Corp. (ZEC), and estimates that acquiring ZEC will result in incremental after-tax net cash flows in years 1-3 of $15.0 million, $22.5 million, and $27.0 million, respectively After the first three years, the incremental cash flows contributed by the ZEC acquisition are expected to grow ata constant rate of 3% per year, w&P's current beta is 1.60, but its post-merger beta is expected to be 2.08. The risk-free rate is 5%, and the market risk premium is 7.10%. Based on this information, complete the following table by selecting the appropriate values