Assume that Legend Inc., an all-equity firm, is currently targeting on two potential companies, Target A and Target B, for acquisitions. Merging with Target A could generate a constant $2M cash flow in the first year and with an annual growth rate of 5% afterwards. Merging with Target B, which is a bit risky, could generate a constant annual cash flow of either $1M or $6.8M with equal chance. Assume that the cost of capital is 10%. Each target has 2M common shares outstanding and will not accept any offer below $20/share. (4 points) Assume that you are allowed to issue bond to help you complete the cash deal if necessary. Assume the new bond is a coupon-only bond without principle payments. Every year, the required coupon payment is 10.3% of the principle. Which firm(s) will you acquire? What is(are) the bidding price(s)? Assume that Legend Inc., an all-equity firm, is currently targeting on two potential companies, Target A and Target B, for acquisitions. Merging with Target A could generate a constant $2M cash flow in the first year and with an annual growth rate of 5% afterwards. Merging with Target B, which is a bit risky, could generate a constant annual cash flow of either $1M or $6.8M with equal chance. Assume that the cost of capital is 10%. Each target has 2M common shares outstanding and will not accept any offer below $20/share. (4 points) Assume that you are allowed to issue bond to help you complete the cash deal if necessary. Assume the new bond is a coupon-only bond without principle payments. Every year, the required coupon payment is 10.3% of the principle. Which firm(s) will you acquire? What is(are) the bidding price(s)