Question
Suppose that Goldfinch Airline is considering the acquisition of another firm in its industry for $100 million. The acquisition is expected to increase Goldfinch's free
Suppose that Goldfinch Airline is considering the acquisition of another firm in its industry for $100 million. The acquisition is expected to increase Goldfinch's free cash flow by $5 million in the first year, and this contribution is expected to grow at a rate of 3% every year thereafter. Goldfinch currently maintains a debt to equity ratio of 1, its corporate tax rate is 21%, its cost of debt r_D is 6%, and its cost of equity r_E is 10%. Goldfinch Airline will maintain a constant debt-equity ratio for the acquisition. Given that Goldfinch issues new debt of $50 million initially to fund the acquisition, the total value of this acquisition using the APV method is closest to ______
_. Group of answer choices $113 million $100 million $115 million $120 million
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