Suppose SMG considers an acquisition that is expected to increase SMGs free cash flow by $6 million the first year, and its contribution is expected to grow at 2.5% per year from then on. SMG has negotiated a purchase price of $66.25 million. SMG always adjusts its capital structure to maintain a constant debt-equity ratio of one. The acquisition has the same risk as SMGs divisions, its corporate tax is 40%, its cost of debt is 5%, and its unlevered WACC is 7%.

a. Determine the net present value (NPV) of this deal via the WACC method?

b. Determine the net present value (NPV) of this deal using the APV method?

c. Determine the net present value (NPV) of this deal using the FTE method?