Use the following information to answer the next three questions. All dollar amount mentioned below are in $thousands. At the end of year 0, you are planning to acquire Van DeLay Industries, a small Manhattan-based firm that specializes in fine rubber products. At year o, Van DeLay's net income is $3,000, depreciation expense is $500, and FCF is $3,800. Van DeLay also faces an effective tax rate of 40%. Based on your analysis of the firm and the industry, you come up with the following estimates for future growth: Growth rates will fluctuate in the next 3 years. However, after that, the firm's growth will stabilize. The non-depreciation FCF (i.e., the FCF minus the depreciation tax shield) will grow at a real rate of 20% in Year 1, 15% in Year 2, and 10% in Year 3. After this period, the non-depreciation FCF will grow at a constant real rate of 6% per year, forever. The depreciation expense will grow at a nominal rate of 8% per year for 3 years. After this period, depreciation will remain constant (at its Year 3 level) forever. You are so confident about your depreciation predictions that you think of them as virtually risk-free. The effective tax rate will remain at 40%. Cash flows are assumed to be spread out evenly over the course of the year. Ignore the FCF in year 0 in your NPV calculation given that it occurred before the end of the year. The real risk-free rate is 4% and the real risky rate applicable to the firm is 13%. You expect the annual inflation to be a constant 5% in the future. The firm's debt is valued at $10,000. Question 16 1 pts What is the discount rate you would use for the projected non-depreciation related FCF in year 1 through year 3 (projected using the growth rate 20%, 15%, and 10%, respectively)? 7.12% 9.2% 18.65% 19.60% 15%