Shares outstanding and target capital structure consisting

Assignment Help Financial Management
Reference no: EM13941542

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

Reference no: EM13941542

Questions Cloud

The amount of debt increases in firms capital structure : In the traditional approach to capital structure, as the amount of debt increases in a firm's capital structure,
Describe what you believe to be the most important concept : Describe what you believe to be the most important concept you have learned through general revelation, a concept that does not seem to be addressed in special revelation.
The bid for each share should range between per share : 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 free cash flow (FCF0) is $2 million per year and is expected to grow at a c..
Create a mystery class in java and implement it : public class MysteryTest
Shares outstanding and target capital structure consisting : 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..
What was the reagan revolution : What was the "Reagan Revolution"? Describe the innovations in policies brought to Washington by President Reagan and the new Congress in 1980. What were the consequences, positive and negative, of the changes?
Annualized dividend yield-portfolio with a beta : The S&P 500 Index price is 1492.28 and its annualized dividend yield is 2.30%. LIBOR is .2%. How many futures contracts will you need to hedge a $240 million portfolio with a beta of 1.16 for one year?
Summarize your thoughts on microsoft project : Write a two to three (2-3) page paper in which you summarize your thoughts on Microsoft Project: Give your opinion on how easy or difficult MS Project seems to be from a user experience standpoint
What would be the total combined direct labor cost : What would be the total combined direct labor cost for the two months? A) $122,752.00B) $120,736.00C) $120,881.60D) $122,606.40

Reviews

Write a Review

Financial Management Questions & Answers

  Project requires initial investment in net working capital

Down Under Boomerang, Inc., is considering a new three-year expansion project that requires an initial fixed asset investment of $2.79 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,110,000 in ..

  Each mix should company prepare for the maximum revenue

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 ..

  Probability distributions of expected future returns

Stocks X and Y have the following probability distributions of expected future returns: Probability X Y 0.1 -14% -35% 0.2 3 0 0.3 16 22 0.3 22 27 0.1 39 40. Calculate the expected rate of return, rY, for Stock Y (rX = 14.50%.)

  What is the projects MIRR and IRR

A project has an initial cost of $41,125, expected net cash inflows of $12,000 per year for 9 years, and a cost of capital of 14%. What is the project's NPV?

  What is the estimated value of rolens preferred stock

Several years ago, Rolen Riders issued preferred stock with a stated annual dividend of 9% of its $100 par value. Preferred stock of this type currently yields 6%. Assume dividends are paid annually. What is the estimated value of Rolen's preferred s..

  Identify which of the three joint products iridium

Joint-cost allocation, process further or sell. Iridium Technologies manufactures a variety of flash memory chips at its main foundry in Anam, Korea. Allocate the $10,800,000 joint production cost to Apple, Broadcom, and Celeron using the NRV method...

  Importance of decision making as a management activity

Has what you have learned in this subject created an increased awareness of the importance of decision making as a management activity? Why or why not?

  What is the yield to maturity and what is the yield to call

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 ..

  What is your required return in order to invest

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..

  What is the key difference between the strategies adopted

Suppose Japanese yen money market annual rate is .60 % and US money market an annual rate of 4.50 %. The predictions on the spot rate in 6 months made by financial analysts X and Y are Yen116/$ and Yen 114/$ respectively. If the sport rate today is Y..

  Projects unit sales for seven-octave voice emulation implant

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..

  Firm is financing its growth with retained earnings

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 ..

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