the first year, and this contribution is expected to grow at a rate of 3%every year there after. 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. The Free Cash Flow-to-Equity (FCFE) for the acquisition in year 1 is closest to: A. $4.7 million B. $6.5 million C. $8.3 million D. $6.8 million
Fig: 1
Fig: 2