1. 16.4, 17.38, 21.31, 17.66 2. 374.50m, 83.19m, 86.54m, 77.58m 3. 57.03m, 71.29m, 92.68m, 85.55m

Western Gas & Electric Co. (WG&E) is considering an acquisition of Zebra Engineering Corp. (ZEC), and estimates that acquiring ZEC will result in incremental after-tax net cash flows in years 1-3 of $8.0 million, $12.0 million, and $14.4 million, respectively. After the first three years, the incremental cash flows contributed by the ZEC acquisition are expected to grow at a constant rate of 4% per year. WG&E's current beta is 1.60, but its post-merger beta is expected to be 2.08. The risk-free rate is 5.5%, and the market risk premium is 7.60%. Based on this information, complete the following table by selecting the appropriate values Value Post-merger cost of equity Projected value of the cash flows at the end of three years The value of Zebra Engineering Corp. (ZEC)'s contribution to Western Gas & Electric Co. (WG&E) Zebra Engineering Corp. (ZEC) has 4 million shares of common stock outstanding. What is the largest tender offer Western Gas & Electric Co. (WG&E) should make on each of Zebra Engineering Corp. (ZEC)'s shares? O $21.39 O $21.38 O $17.82 O $14.26