Suppose that you are examining a company as a potential acquisition target. Your

analyst did a DCF analysis, and you know that the company has a total $($enterprise$)$

value of $$100$ million. Your analyst looked at the numbers over time, and estimated

that the volatility of its assets is $25\%.$ You want to put in an offer to purchase all of

the equity of the company, because that would give you control. The company has

$($zero$-$coupon$)$ risky debt outstanding with a principal amount of $$70$ million. All of the

debt is due in $3$ years, and it all has the same seniority$.$ The current risk$-$free interest

rate is $3\%.$