Donuts firm is considering a merger with Cookie Corp.Cookie has 3,000,000 shares outstanding and a target capital structure of 25% debt.Cookie's debt interest rate is 8% on $50M in debt.The risk-free interest rate is 0.55% and the market risk premium is 6%.Both firms are in the 25% tax bracket.Cookie's (levered) equity beta is 1.50.The current value of Cookie's stock is $50 per share.Donuts estimates synergies will produce the additional income given below.After year 3, the tax shields and free cash flows will grow by 3% and the combined firm will maintain the 25% debt ratio.

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