(6) An ABC firm is targeting to acquire XYZ firm. The following table shows pro-forma cash flow statement (post-merger cash flow forecasts) if acquisition is to be made. Calculate the cash flows of 2021 and 2022 with the assumption that net sales will grow at 10% and consequently all other things too. After 2022, cash flows will grow at a constant rate of 6%. (10 marks) 2121 2022 Net sales - Cost of goods sold - Selling/admin. exp. - Interest expense EBT - Taxes Net Income Retentions Cash flow 2017 $60.0 36.0 4.5 3.0 16.5 6.6 9.9 0.0 9.9 2018 $90.0 54.0 6.0 4.5 25.5 10.2 15.3 7.5 7.8 2019 $112.5 67.5 7.5 4.5 33.0 13.2 19.8 6.0 13.8 2020 $127.5 76.5 9.0 6.0 36.0 14.4 21.6 4.5 17.1 a) Calculate the discount rate if Rf is 5%, market risk premium is 4% and new firm's beta is 30% riskier than the market. b) Calculate the PV max of all these cash flows at the discount rate which you have calculated in part a. c) What is the per share price which target firm's shareholder would receive? Assume there are 2 million shareholders of target firm