Hastings estimates that if it acquires Vandell, interest payments will be $1,500,000 per year for 3 years

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Hastings estimates that if it acquires Vandell, interest payments will be $1,500,000 per year for 3 years after which the current target capital structure of 30 percent debt will be maintained. Synergies will cause the free cash flows to be $2.5 million, $2.9 million, and then $3.4 million, after which the free cash flows will grow at a 5 percent rate. What is the per-share value of Vandell to Hastings Corporation? Assume Vandell now has $10.82 million in debt.

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...
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Financial management theory and practice

ISBN: 978-0324422696

12th Edition

Authors: Eugene F. Brigham and Michael C. Ehrhardt

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