Suppose that Rose Industries is considering the acquisition of another firm in its industry for $100 million. The acquisition is expected to increase Rose's free cash flow by $5 million the first year, and this contribution is expected to grow at a rate of 3% every year thereafter. Rose currently maintains a debt to equity ratio of 1, its marginal tax rate is 40%, its cost of debt rD is 6%, and its cost of equity rE is 10%. Rose Industries will maintain a constant debt-equity ratio for the acquisition. What is the Free Cash Flow-to-Equity (FCFE) for the acquisition in year 1 in millions of dollars? [2 points] Rose Industries expected FCFE per year (in millions of dollars, rounded to two decimals): _____________

Calculations: