4. Gamma Appliances, a publicly traded appliance manufacturer, is considering anacquisition of Praxis, a privately owned appliance manufacturer. You have been provided with the following information: Gamma Appliances $11 million Praxis $5 million After-tax operating income next year Debt/Capital ratio Invested Capital 32.00% 0.00% $100 million $30 million Both companies are in stable growth, growing 3% a year. The risk free rate is 3%and the equity risk premium is 5%. The appliance sector has an unlevered beta of 0.80 and a correlation of 0.50 with the market. The marginal tax rate for all firms is 28%. a. Value Praxis as a stand-alone company to its existing owner, who is undiversified. b. Gamma plans to acquire Praxis, what is the maximum price that Gamma Appliances can offer to Praxis? What would be a probable transaction price for this deal? Explain. 4. Gamma Appliances, a publicly traded appliance manufacturer, is considering anacquisition of Praxis, a privately owned appliance manufacturer. You have been provided with the following information: Gamma Appliances $11 million Praxis $5 million After-tax operating income next year Debt/Capital ratio Invested Capital 32.00% 0.00% $100 million $30 million Both companies are in stable growth, growing 3% a year. The risk free rate is 3%and the equity risk premium is 5%. The appliance sector has an unlevered beta of 0.80 and a correlation of 0.50 with the market. The marginal tax rate for all firms is 28%. a. Value Praxis as a stand-alone company to its existing owner, who is undiversified. b. Gamma plans to acquire Praxis, what is the maximum price that Gamma Appliances can offer to Praxis? What would be a probable transaction price for this deal? Explain