What is vandell cost of equity

Assignment Help Business Management
Reference no: EM132794094

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1.5 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.25 (given its target capital structure). Vandell has $9.50 million in debt that trades at par and pays a 7.1% 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. Vandell pays a 25% combined federal-plus-state tax rate, the same rate paid by Hastings. The risk-free rate of interest is 6%, and the market risk premium is 8%. Hasting's first step is to estimate the current intrinsic value of Vandell.

a. What is Vandell's cost of equity? Do not round intermediate calculations. Round your answer to two decimal places.

b. What is its weighted average cost of capital? Do not round intermediate calculations. Round your answer to two decimal places.

c. What is Vandell's intrinsic value of operations? (Hint: Use the free cash flow, corporate valuation model.) Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Do not round intermediate calculations. Round your answer to two decimal places.

d. Based on this analysis, what is the minimum stock price that Vandell's shareholders should accept? Do not round intermediate calculations. Round your answer to the nearest cent.

Reference no: EM132794094

Questions Cloud

What the number of shares of treasury stock is : Assuming the treasury shares were all purchased at the same price, the number of shares of treasury stock is? Common stock $10 par value 18,000 shares
What are the major securities in category : What is the role of capital markets for individuals and corporations?
Concise overview of the topic and recommendations : The topic you choose needs to be focused so that you can provide a concise overview of the topic and recommendations in the length allotted
Discuss how slavery created deep divisions : Please watch the film "Seeds of Destruction (Links to an external site.)," about how slavery created deep divisions between the sections - North and South.
What is vandell cost of equity : a. What is Vandell's cost of equity? Do not round intermediate calculations. Round your answer to two decimal places.
Should opera house be acceptd on the basis of the irr : If the cost of capital of Opera House is 16 percent, should Opera House be acceptd on the basis of the IRR if it's cash flows are as follows?
What is the current price of the bond : Black Water Corp. just issued zero-coupon bonds with a par value of $1,000. The bond has a maturity of 24 years and a yield to maturity of 9.18 percent
Examine marxs writings on communism and socialism : Examine Marx's writings on communism and socialism and compare them to how they manifested in reality? What worked and what didn't? What misconceptions.
Short-term or long-term funds in the euromarkets : What are the ways of large company raise both short-term or long-term funds in the Euromarkets?

Reviews

Write a Review

Business Management Questions & Answers

  What should be done to maintain optimum stock levels

What should be done to maintain optimum stock levels and why is it important to keep accurate and up-to-date records of stock?

  Explain why technology plays such an important role in gvts

In this report, you are to- provide an appropriate definition of a GVT which identifies the unique features of a GVT and explain why technology plays such an important role in GVTs

  Workers compensation overall

Propose the main ways in which health status affects workers' compensation overall. Provide at least one (1) example the model in use to support your response.

  Describe international business practices

describe international business practices and discuss how they are being shaped by economic theories, financial, socio-cultural and political forces; with particular emphasis on the business practices of UK's major trading partners;

  Responding to social health needs

Identify at least 2 ways the law has been used to respond to health-harming social needs in health communities. Do you feel the response was effective? What changes would you recommend as a healthcare regulator? Justify your rationale.

  Explain and identify the needs of stakeholders

Explain and Identify the needs of stakeholders for each opportunity and build a business plan for the most promising opportunity

  Electronic Medical Record

You will want to include some of the Joint Commission's requirements pertaining to what should be included in the medical record

  Orthodontists feel like wild weekend bikers

After all, if Harley Davidson can build a brand that makes 55 year old orthodontists feel like wild weekend bikers - the road's wide open.

  Illustrate what do organizations consider

Illustrate what do organizations consider when trying to choose inter organizational strategies in order to minimize transaction costs and bureaucratic costs?

  Explanation of organization structures

Choose two of the following organization structures and describe the advantages and disadvantages of the ones you select.

  Business alliance for local living economies

Why dose The Business Alliance for Local Living Economies, (BALLE) support green causes and work-family accommodations while the Chamber of Commerce

  Calculate the arc price elasticity of t-bone steak

The store manager notices that chicken breast sales decrease by 10 percent.

Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd