AG Mechanical is planning to acquire Foster Metal works. Foster's cost of equity is 12%; it is

Question:

AG Mechanical is planning to acquire Foster Metal works. Foster's is 12%; it is financed 80% by common equity and the remainder by debt at 7%. Foster's tax rate is 30%. Below is a 4-year forecast prepared by AG Mechanical regarding Foster's future free cash flows, interest expense, and new debt. After Year 4, growth is expected to be 3.5%. The and is not expected to change.

What is the maximum amount that AG Mechanical should pay for Foster Metalworks?
The following information is required to work Problems 24-7 through 24-9.
Brock Industries is contemplating whether to make a takeover bid for Dearborn Aerospace. Dearborn currently has $16 million of debt at 7%, and the market value of its equity is $34 million. Dearborn's tax rate is 35%. The following financial information, which includes all synergies, has been forecast for Dearborn Aerospace if the acquisition takes place. Dearborn's long-term growth rate is expected to be 4% per year.

Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a... Cost Of Debt
The cost of debt is the effective interest rate a company pays on its debts. It’s the cost of debt, such as bonds and loans, among others. The cost of debt often refers to before-tax cost of debt, which is the company's cost of debt before taking... Cost Of Equity
The cost of equity is the return a company requires to decide if an investment meets capital return requirements. Firms often use it as a capital budgeting threshold for the required rate of return. A firm's cost of equity represents the...