Valuation-what is the current value of vandells stock

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Valuation

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell's debt interest rate is 7.4%. Assume that the risk-free rate of interest is 6% and the market risk premium is 4%. Both Vandell and Hastings face a 35% tax rate.

Vandell's free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 6% a year; its beta is 1.60. What is the value of Vandell's operations? (Hint: Use the corporate valuation model.) Round your answer to two decimal places. Do not round intermediate calculations.

$   million

If Vandell has $11.17 million in debt, what is the current value of Vandell's stock? (Hint: Use the corporate valuation model.) Round your answer to the nearest cent. Do not round intermediate calculations.

$   /share

Reference no: EM131147405

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