Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Merger Bid
Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.40 (given its target capital structure). Vandell has $9.48 million in debt that trades at par and pays an 7.5% interest rate. Vandell's free cash flow (FCF0) is $1 million per year and is expected to grow at a constant rate of 6% a year. Both Vandell and Hastings pay a 35% combined federal and state tax rate. The risk-free rate of interest is 4% and the market risk premium is 6%.
Hastings Corporation estimates that if it acquires Vandell Corporation, synergies will cause Vandell's free cash flows to be $2.5 million, $3.0 million, $3.5 million, and $3.53 million at Years 1 through 4, respectively, after which the free cash flows will grow at a constant 6% rate. Hastings plans to assume Vandell's $9.48 million in debt (which has an 7.5% interest rate) and raise additional debt financing at the time of the acquisition. Hastings estimates that interest payments will be $1.6 million each year for Years 1, 2, and 3. After Year 3, a target capital structure of 30% debt will be maintained. Interest at Year 4 will be $1.417 million, after which the interest and the tax shield will grow at 6%.
Indicate the range of possible prices that Hastings could bid for each share of Vandell common stock in an acquisition. Round your answers to the nearest cent. Do not round intermediate calculations.
The bid for each share should range between $ per share and $ per share.
How is the Leasing Paradox resolved? By the presence of differential tax brackets for the lessor and the lessee.
The weighted average cost of capital (WACC) is 10%. Between year 2 and year 3, the business may be shrunk due to a slowdown in the country.
Furthermore, assume others do not share this belief. What action in the futures market should you take to capitalize on your beliefs?
The market risk premium is 7.2. The firm's required return is 11.2%. The risk-free rate is 5%. What is the firm's beta? Your portfolio has a beta of 1.4. The portfolio consists of $30,000 of GM and $20,000 of Ford stock. GM's beta is 1.1. What is the..
Compare qualitatively the indirect bankruptcy costs of operating a franchised hotel to that of running a high-tech start-up computer firm.
a 25-year 1000 par value bond has an 8.5 annual payment coupon. the bond currently sells for 900. if the yield to
Prepare the journal entry to record the note on November 1. (If no entry is required for a transaction/event, select "No journal entry required" in the first).
Huntsville supplies is estimating the profitability of leasing a photocopier for its customers to use on a self-serve basis at ten cents per copy.
Corporation decides to raise 500,000 for improvements to its manufacturing plant.It has decided to issue a 1000 par value bond w/14% annual coupon rate and 10 year maturity.
acitelli corporation which applies manufacturing overhead on the basis of machine-hours has provided the following data
Investors expect a return R of 9.00%. What is the stock's expected price 3 years from today?
Read the book "be our guest: perfecting the art of customer service", and what is your reflection of the book?
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd