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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 8%.
Harrison estimates that if it acquires Van Buren, the year-end dividend will remain at $2.80 a share, but synergies will enable the dividend to grow at a constant rate of 10% a year (instead of the current 6%). 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 1.3. What is the per-share value of Van Buren to Harrison Corporation? Round your answer to the nearest cent.
Suppose the dividend today, Do, is $2.50, and the growth rate (g) is expected to be 25% for the next 3 yrs, followed by a normal growth rate (g) of 6% thereafter. Assume the investors require 13%, rs. Calculate the value of the stock today, Po. This ..
A person owns a section of farm land and is cash renting it to a long time neighbour who is not a relative. What does this person have to do to get the land designated Qualified Farm Property?
Gabrielle just won $2.5 million in the state lottery. She is given the option of receiving a total of $1.3 million now, or she can elect to be paid $100,000 at the end of each of the next 25 years. If Gabrielle can earn 5% annually on her investments..
The market value of the equity of Thompson, Inc., is $307,000. The balance sheet shows $22,000 in cash and $200,000 in debt, while the income statement has EBIT of $97,000, and a total of $136,000 depreciation and amortization. What is the enterprise..
Assuming that all cash flows are discounted at 10%, if NPC chooses to wait a year before proceeding, how much will this increase or decrease the project's expected NPV in today's dollars (i.e., at t = 0), relative to the NPV if it proceeds today?
Discuss present value and future value annuities and annuity dues. What is the timing of cash flows? What are their differences? What are the advantages of both? How are they used by financial management?
A 4-year financial project is forecast to have net cash inflows of $20,000; $25,000; $30,000; and $50,000 in the next 4 years. it will cost $75,000 to implement the project, payable at the beginning of the project. If the required rate of return is 0..
Compare and contrast the internal rate of return approach to the net present value approach to capital rationing. Which is better? Support your answer with well-reasoned arguments and examples.
What is the free cash flow for 2013 and Suppose Congress changed the tax laws so that Berndt's depreciation expenses doubled. No changes in operations occurred. What would happen to reported profit and to net cash flow
Calculate NPV, Payback, Discounted Payback, IRR and Modified IRR for the following project
Erna Corp. has 6 million shares of common stock outstanding. The current share price is $89, and the book value per share is $8. Erna Corp. also has two bond issues outstanding. The first bond issue has a face value of $85 million, has a coupon of 6 ..
In your readings you were shown sources where decision tools can be found. Please refer to the "What is a Decision?" lecture and select "Click to Explore." In the list provided, you will notice paired comparison analaysis. Select and read about this ..
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