4. Merger valuation and discounted cash flows When a merger takes place between two companies to form a single firm, the target company to operate as a separate identity. Consider the following scenario: Spentworth Industries Corp. is considering an acquisition of Drugal Brewing Co. (DBC), and estimates that acquiring DBC will result in incremental after-tax net cash flows in years 13 of $8 million, $12 million, and $14.4 million, respectively. After the first three years, the incremental cash flows contributed by the DBC acquisition are expected to grow at a constant rate of 5% per year. Spentworth's current beta is 0.80 , but its post-merger beta is expected to be 1.04 . The risk-free rate is 3%, and the market risk premium is 5.10%. Based on this information, complete the following table by selecting the appropriate values. (Note: Round your intermediate calculations to two decimal places.) Based on this information, complete the following table by selecting the appropriate values. (Note: Round your intermediate calculations to two decimal places.) Drugal Brewing Co. (DBC) has 6 million shares of common stock outstanding. What is the largest tender offer Spentworth Industries Corp. should make on each of Drugal Brewing Co. (DBC)'s shares? $64.94 $51.96 $77.93 4. Merger valuation and discounted cash flows When a merger takes place between two companies to form a single firm, the target company to operate as a separate identity. Consider the following scenario: Spentworth Industries Corp. is considering an acquisition of Drugal Brewing Co. (DBC), and estimates that acquiring DBC will result in incremental after-tax net cash flows in years 13 of $8 million, $12 million, and $14.4 million, respectively. After the first three years, the incremental cash flows contributed by the DBC acquisition are expected to grow at a constant rate of 5% per year. Spentworth's current beta is 0.80 , but its post-merger beta is expected to be 1.04 . The risk-free rate is 3%, and the market risk premium is 5.10%. Based on this information, complete the following table by selecting the appropriate values. (Note: Round your intermediate calculations to two decimal places.) Based on this information, complete the following table by selecting the appropriate values. (Note: Round your intermediate calculations to two decimal places.) Drugal Brewing Co. (DBC) has 6 million shares of common stock outstanding. What is the largest tender offer Spentworth Industries Corp. should make on each of Drugal Brewing Co. (DBC)'s shares? $64.94 $51.96 $77.93