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. Question 42 (6 points) (6 points) Assume that you are the project manager of Legend Inc and you do not own any shares of your company and your compensation is purely tied to the project performance designed as follows: you earn 10 percent of annual cash flows being generated from the deals you completed. If the annual cash flow generated from the deals exceeds 5M, you get 20 percent of the incremental part. Now, assume that Legend Inc. only wants to go with cash deals and its cash reserves are $50M. Assume that Legend Inc. is the sole bidder. Which target(s) will be acquired if you make the call? What is your bidding price? *You are encouraged to upload your answers to all numeric questions in one file and upload 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. Question 42 (6 points) (6 points) Assume that you are the project manager of Legend Inc and you do not own any shares of your company and your compensation is purely tied to the project performance designed as follows: you earn 10 percent of annual cash flows being generated from the deals you completed. If the annual cash flow generated from the deals exceeds 5M, you get 20 percent of the incremental part. Now, assume that Legend Inc. only wants to go with cash deals and its cash reserves are $50M. Assume that Legend Inc. is the sole bidder. Which target(s) will be acquired if you make the call? What is your bidding price? *You are encouraged to upload your answers to all numeric questions in one file and upload