Find per-share value of van buren to harrison corporation

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Reference no: EM132635057

Merger Valuation

Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 4%, and the market risk premium is 5%.

Harrison estimates that if it acquires Van Buren, the year-end dividend will remain at $1.57 a share, but synergies will enable the dividend to grow at a constant rate of 8% a year (instead of current 5%). Harrison also plans to increase the debt ratio of what would be its Van Buren subsidiary; the effect of this would be to raise Van Buren's beta to 1.05.

1a. What is the per-share value of Van Buren to Harrison Corporation? Do not round intermediate calculations.

Reference no: EM132635057

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