TransWorld Communications Inc., a large telecommunications company, is evaluating the possible acquisition of Georgia Cable Company (GCC), a regional cable company. TransWorld's analysts project the post-merger data for GCC (in thousands of dollars) gathered in the Excel Online file below. If the acquisition is made, it will occur on January 1, 2018. All cash flows shown in the income statements are assumed to occur at the end of the year. GCC currently has a capital structure of 40% debt, but Trans World would increase that to 50% if the acquisition were made. GCC, if independent, would pay taxes at 20%; but its income would be taxed at 40% if it were consolidated. GCC's current market-determined beta is 1.35, and its investment bankers think that its beta will rise to 1.41 if the debt ratio were increased to 50%. The cost of goods sold is expected to be 80% of sales, but it could vary somewhat. Depreciation-generated funds would be used to replace worn-out equipment, so they would not be available to TransWorld's shareholders. The risk-free rate is 8%, and the market risk premium is 3%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Use only the values provided in the problem statement (including the Excel Online file) for your calculations.

1. What is the appropriate discount rate for valuing the acquisition? Do not round intermediate calculations. Round your answer to two decimal places.

   _________ %

2. What is the continuing value? Do not round intermediate calculations. Enter your answer in thousands of dollars. For example, an answer of $145.2 thousands should be entered as 145.2, not 145,200. Round your answer to two decimal places.

   $ _______ thousand

3. What is the value of GCC to TransWorld? Do not round intermediate calculations. Enter your answer in thousands of dollars. For example, an answer of $145.2 thousands should be entered as 145.2, not 145,200. Round your answer to two decimal places.

   $ ______ thousand