What is per-share value of van-buren to harrison corporation

Assignment Help Financial Management

Reference no: EM131185242

Harrison corporation is intersted in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 5%, and the market risk premium is 6%. Harrison estimates that if it acquires Van Buren, teh year end dividend will remain at $2.5 a share, but synergies will enable the dividend to grow at a constant rate of 6% a year (instead of current 5%). Harrison 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 1.15. What is the per-share value of Van-Buren to Harrison Corporation?

Reference no: EM131185242

Questions Cloud

Difference between current liability and long-term liability : What is the difference between a current liability and a long-term liability? How are liabilities taken into account when analyzing an organization's current financial position? Is it better to have more money in liabilities or equity?

Present value with different discount rates : Present Value with Different Discount Rates Compute the present value of $1,000 paid in three years using the following discount rates: 6 percent in the first year, 7 percent in the second year, and 8 percent in the third year.

Find the present value of an annuity : Find the Present Value of an annuity thay pays $1000 per year for 12 years at 10%? How would your answer change if the payments are made at the beginning of the year? What is the PV of a perpetuity of $100 per year if the appropriate discount rate is..

Calculate the gross profit margin-operating profit margin : Profitability Ratios Maggie’s Skunk Removal Corp.’s 2015 income statement listed net sales of $12.5 million, gross profit of $6.9 million, EBIT of $5.6 million, net income avail- able to common stockholders of $3.2 million, and common stock dividends..

What is per-share value of van-buren to harrison corporation : Harrison corporation is intersted in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 5%, and the market risk premium is 6%. What is the per-share value of Van-Buren to Harrison Corporation?

What is approporate discount rate for valuing acquisition : Martin Technologies Inc., a large electronics company, is evaluating the possible acquisition of Columbia Electronics, a regional electronics company. Martin's analysts roect the following post-merger data for Columbia (in millions of dollars); 2015 ..

Considered to calculate the initial outlay and why : Calculate the initial outlay required to fund the following project: The firm is considering the purchase of equipment that has an invoice price of $450,000. The cost of shipping and installation is $50,000. Explain what is and is not considered to c..

What are the incremental free cash flows associated : Daily enterprise is purchasing a $10.2 million machine. It will cost $47,000 to transport and install the machine. The machine has a depreciation life of five years using straight line depreciation and will have no salvage value. What are the increme..

Asset management and debt management ratios : Asset Management and Debt Management Ratios Use the following information to complete the following balance sheet. Sales are $8.8 million, capital intensity ratio is 2.10 times, debt ratio is 55 percent, and fixed asset turnover is 1.2 times.

User Account

All Pages