What is the value of teldar to gekko properties

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Gekko Properties is considering purchasing Teldar Properties. Gekko's analysts project that the merger will result in incremental after-tax net cash flows of $2 million, $4 million, $5 million, and $10 million over the next four years. The terminal value of the firm's operations, as of Year 4, is expected to be $107 million. Assume all cash flows occur at the end of the year. The acquisition would be made immediately, if it is undertaken. Teldar's post-merger beta is estimated to be 1.7, and its post-merger tax rate would be 35%. The risk-free rate is 6%, and the market risk premium is 5.5%. What is the value of Teldar to Gekko Properties?

a)$74,084,760
b)$58,526,961
c)$70,380,522
d)$57,045,265
e)$68,157,980

 

Reference no: EM13305416

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