Ace hardware is considering purchasing a smaller chain, Brown hardware. Ace analyst project that the merger will result in the following incremental free cash flows, tax shields, and horizon values: Year 1 2 3 4 fre cash flow $2 $4 $2 $6 unlevered horizon value 74 tax shield 1 2 1 4 horizon value of tax shield 35 a) Assume that all cash flows occur at the end of the year. Ace is currently financed with 40% equity and the interest rate on its debt is 8%. The acquisition would be made immediately, and if it is undertaken, Brown would retain its current $20 million of debt and issue enough new debt to continue at the 60% target level. The interest rate would remain the same. Browns pre-merger beta is 1.5, and its post-merger tax rate would be 37%. The risk-free rate is 7% and the return on the market is 12%. What is the value of Browns to Ace?