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A firm is considering acquiring a competitor. The firm plans on offering $ 160 million for the competitor. The firm will need to issue new
A firm is considering acquiring a competitor. The firm plans on offering
$ 160 million for the competitor. The firm will need to issue new debt and equity to finance the acquisition. You estimate the issuance costs to be$10million. The acquisition will generate an incremental free cash flow of
$ 30million in the first year and this cash flow is expected to grow at an annual rate of 55% forever. If the firm's WACC is
13%, what is the value of this project?
A.
$ 205
million
B.
$ 308
million
C.
$ 256
million
D.
$ 359
million
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