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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 5% and the market risk premium is 4%. Both Vandell and Hastings face a 35% tax 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; its beta is 1.50. 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 $9.77 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
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A candy company has 111kg of chocolate- covered nuts and 69kg of chocolate- covered raisins to be sold as two different mixs. One mix will contain half nuts and half raisins and will sell for $7 per kg. The other mix contain 3/4 nuts and 1/4 raisins ..
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It is now January 1, 2012, and you are considering the purchase of an outstanding bond that was issued on January 1, 2010. It has a 7.5% annual coupon and had a 30-year original maturity. What is the yield to maturity. If you bought this bond, which ..
Apple Computers just paid a dividend of $6.94 and is expected to grow at 5%. You have estimated their beta at 0.95, with a risk free rate of 2.5% and equity risk premium of 6%. What is their current market value? You are valuing stock in Tofrandi Nat..
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Aria Acoustics, Inc. (AAI), projects unit sales for a new seven-octave voice emulation implant as follows: Year Unit Sales 1 75,000 2 88,000 3 102,000 4 97,000 5 78,000 Production of the implants will require $1,540,000 in net working capital to star..
A firm is financing its growth with retained earnings. It is retaining 80 percent of its annual earnings. The firm's historic return on equity is 16 percent, a figure that is expected to continue into the future. How much will earnings grow over the ..
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