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*please show work thank youMERGER ANALYSIS TransWorld Communications Inc., a largetelecommunications company,is evaluating the possible acquisition of Georgia Cable Company(GCC), a regionalcable company. TransWorld’s analysts project the followingpost-merger data for GCC (inthousands of dollars): 2015 2016 2017 2018Net sales $450 $518 $555 $600Selling and administrative expense 45 53 60 68Interest 18 21 24 27Tax rate after merger 35%Cost of goods sold as a percent of sales 65%Beta after merger 1.50Risk-free rate 8%Market risk premium 4%Continuing growth rate of cash flow available toTransWorld 7%If the acquisition is made, it will occur on January 1, 2015. Allcash flows shown in theincome statements are assumed to occur at the end of the year. GCCcurrently has acapital structure of 40% debt, but Trans World would increase thatto 50% if theacquisition were made. GCC, if independent, would pay taxes at 20%;but its incomewould be taxed at 35% if it were consolidated. GCC’s currentmarket-determined betais 1.40, and its investment bankers think that its beta would riseto 1.50 if the debt ratiowere increased to 50%. The cost of goods sold is expected to be 65%of sales, but itcould vary somewhat. Depreciation-generated funds would be used toreplace wornoutequipment, so they would not be available to TransWorld’sshareholders. The riskfreerate is 8%, and the market risk premium is 4%.a. What is the appropriate discount rate for valuing theacquisition?b. What is the continuing value?c. What is the value of GCC to TransWorld?