. ) The Brown Corporation is viewed as a possible takeover target y Cicron, Inc. Currentdy, Brown uses 20 percent debt in is cupital structure, but Cicron plans o increase the debt ratio to 25 percent if the scquistion is consummated The fer-tar cost of debt capital for Brown is estimated to be 8 percent, which holds constant under either apital structure. The cost of equty sfter th acquisition is eapected to be 22 percent. The current mar ket value of Brown's oustanding debt is $75 million, ll f which will be assumed by Clcron Cicron intends to pay $225 million incash and common stock for lof Browns stock in addition to assuming all of Brown' debt. Currently, the market price of Browns common stock is $200 million. Selected items from Brown's financial data are as follows 2004 2005 2008 2007 THEREAFTER (MILLIONS) Net sales dministrative and slling expenses Depreciation Capital expenditures $260 $265 $280 $290 $300 25 15 17 8 23 30 22 18 18 20 22 2525 30 30 Inaddion, the cost of goods sold runs 50percent of sales and the marginal tar rate is Apercent. Compute the net present value of the acquisition Required: a. Compute NPV of the acquisition b. Make decision to acquire or not. Explain