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Assume that the target firm will generate $10 million FCFs next year (with growth rate=5%) and that the cost of capital for this firm is
Assume that the target firm will generate $10 million FCFs next year (with growth rate=5%) and that the cost of capital for this firm is 15%. Assume that as an acquiring firm, you are in a much safer business and have a cost of equity of 10%. Both the target and acquirer are public companies. What is the value of the target?
Select one:
a. $105 million
b. $100 million
c. $205 million
d. $200 million
e. $210 million
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