Part VI: Capital Budgeting analysis, Capital Structure Analysis and Funding Growth Strategies, and Bibliography and Data (due Week 3) Capitol Budgeting Analysis [30 points): You have been asked to evaluate a poten1ial acquisition of a smaller privately owned competitor. The acquisition candidate produces an EBITDA of 1D% of your current terms and is offered to your rm at a price of multiple of 3 times EBITDJL Assume the following: I! Current debt costs you 3% and you can raise additional debt at this rate today. The loan is to be amortized over Tyears. ' Current return on equity is 15% Ir Current WACC is 10% I! Tax rate is 30% (constant) Ir 30% of the purchase price is considered depreciable assets to be depreciated over ten years on a straightline basis with no residual values. Ir Residual value for this operation is to be 21: current EBITDA in year ten. Create an after-tax cash ow analysis to answer the following: I! Economic analysis: is this a fundamentally sound investment? ' Using the tax cash ows and no debt {pure equity}, is the prospect a positive N'PV using RUE as the hurdle rate? Ir Using the after tax cash ows and the rm's WACC, is this project desirable? Explain how you came to this conclusion