Jhns post merger beta is estimated to be 15 the

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Merger Value. Burger Queen, a national hamburger chain, is considering a smaller chain, Johns Burger. Burger Queen's analysts project that the merger will result in the following incremental net cash flows (in millions of dollars):

Year 1

Year 2

Year 3

Year 4

1.5

2

3

5

Furthermore, Johns' cash flows are expected to grow at a constant rate of 5 percent after Year 4. Johns' post merger beta is estimated to be 1.5, the risk-free rate is 6 percent, and the market risk premium is 4 percent. Calculate the value of Johns' Burger to Burger Queen.

Reference no: EM13573937

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