Interested in acquiring van buren corporation

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Merger Valuation

Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 6%, and the market risk premium is 7%.

Harrison estimates that if it acquires Van Buren, the year-end dividend will remain at $2.19 a share, but synergies will enable the dividend to grow at a constant rate of 7% 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 1.2. What is the per-share value of Van Buren to Harrison Corporation? Do not round intermediate calculations.

$ (to 2 decimals)

Reference no: EM131859451

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