Unlevered cost of equity $-?$

Horizon value of unlevered cash flows $-?$

Horizon value of tax shield $-?$

Unlevered value of operations $-?$

Value of tax shield $-?$

Value of operations $-?$

Thus, the total value of Globo$-$Chem's equity is $-?$

Eades Logistics Corp. plans to use more debt in the first few years of the acquisition of Globo$-$Chem Co$.$ Assuming that using more debt will not lead to an increase in bankruptcy costs for Eades Logistics Corp., the interest tax shields and the value of the tax shield in the analysis, will $($decrease$/$increase$)$ leading to a l$($ower$/$higher$)$ value of operations of the acquired firm.

The APV approach is considered useful for valuing acquisition targets, because the method involves finding the values of the unlevered firm and the interest tax shield separately and then summing those values. Why is it difficult to value certain types of acquisitions using the corporate valuation model? $($choose correct option$)$

A$.$ The acquiring firm immediately retires the target firm's old debt. Thus, the acquisition deal consists of only new debt in its capital.

B$.$ The acquiring firm usually assumes the debt of the target firm. Thus, old debt with different coupon rates usually becomes a part of the acquisition deal.