Assume your company's betawill be 1.50 after the merger (that is, considering these new cashflows).
Assume your post acquisition taxrate to be 40%; the risk free rate to be 6%.
Assume your market risk premium is4%.
	Hints:
	This problem requires the use of several mathformulas used throughout the term and Finance 3331.
	Some of these formulas mightinclude:
	Time Value of Money
	WACC
	CAPM
	Constant Growth Model / non-constant growthdividend valuation model
	Corporate Valuation Model
	ROE (part of the Dupont Models)
	Black Scholes Option pricing models
	Purchase Price Parity
	Suggestions
	#1	From the data provided, determine your requiredreturn.
	#2	Determine the cash flows for years 2 thruinfinity.
	#3	Tackle the problem backwards
	#4	You might want to re-visit chapter 9 and theconstant growth model (years 5 thru infinity)
	What is the cash flow received in year 3 for thenew division?
	Which formula requires the use of the 'postacquisition tax rate in this problem?
	What is the required return used in the problem(given the data above)?
	What is the "value" of this business given thefuture cash flows and your required rate of return?
	(Your answer should be in millions).