Acquirer firm plans to launch a takeover of Target firm. The manager of Acquirer indicates that the deal will increase the free cash flow of the combined business by $13.6m per year forever. The beta of the combined firm is 1.2, market portfolio return is 12% and risk free interest rate is 4%.

Firms Involved in the Takeover Acquirer Target Assets ($m) 6000 800 Debt ($m) 2000 300 Number of shares (m) 80 20