B V. Format Painter 4 ob ili IM = Clipboard Font Undo Alignmen B28 B 1 30.00% 70.00% 1,000,000 $11,870,000 7.30% 4.00% 4.00% 40.00% 1.30 $1,600,000 4.00% $2,300,000 $2,900,000 $3,300,000 $3.820,000 $34,300,000 8.00% Merger Valuation with Change in Capital Structure 2 3 Current target capital structure: 4 Debt 5 Equity 6 Number of common shares outstanding 7 Current debt amount 8 9 Debt interest rate 10 Risk-free rate 11 Market risk premium 12 Tax rate 13 Beta 14 Interest payments, Years 1 - 3 15 Growth rate 16 Free cash flow. Year 1 17 Free cash flow, Year 2 18 Free cash flow, Year 3 19 Free cash flow, Year 4 20 21 Level of debt, Year 3 22 New interest rate at higher debt level 23 New target capital structure: 24 Debt 25 Equity 26 27 Calculate target firm's levered cost of equity 28 29 30 Calculate target firm's unlevered cost of equity 31 su 32 33 Calculate target firm's unlevered value: 34 Unlevered horizon value of FCF 35 Unlevered value of operations 36 37 Calculate value of interest tax shields: 38 Taxshield, Year 1 39 Tax shield, Year 2 40 Tax shield, Year 3 41 Tax shield, Year 4 42 Tax shield, Horizon value 43 44 Value of tax shields 45 46 Calculate target firm's per share value to acquiring firm: 45.00% 55.00% Formulas #N/A #NA #N/A #N/A #NA #NA #NA #NA #NA #N/A Sheet1 x Excel Formulas Data Review View Insert Help Tell me what you want to do File Home Arial X Cut 10 A A = = 25 W Paste Copy Format Painter B I w. R ab 2. A Font Alignment Undo Cipboard B28 D A 13 Beta 14 Interest payments, Years 1.3 15 Growth rate 16 Free cash flow. Year 1 17 Free cash flow. Year 2 18 Free cash flow, Year 3 19 Free cash flow. Year 4 20 21 Level of debt, Year 3 22 New interest rate at higher debt level 23 New target capital structure: 24 Debt 25 Equity 1.30 $1,800,000 4.00% $2,300,000 $2,900,000 $3,300,000 $3,820,000 $34,300,000 8.00% 45.00% 55.0096 Formulas #N/A #N/A 27 Calculate target firm's lovered cost of equity 28 29 30 Calculate target firm's unlevered cost of equity 31 32 33 Calculate target firm's unlovered value: 34 Unlevered horizon value of FCF 35 Unlevered value of operations 36 37 Calculate value of interest tax shields: 38 Taxshield, Year 1 39 Tax shield, Year 2 40 Taxshield, Year 3 41 Taxshield, Year 4 42 Tax shield, Horizon value #N/A #N/A UNIA #N/A #N/A #N/A #NA NA UNIA #NA ANIA 44 Value of tax shields 45 46 Calculate targo firm's per share value to acquiring firm: 47 Value of operations 48 Target firm's equity value to acquiring firm 49 Por share value to acquiring firm 50 51 52 53 54 55 56 57 58 Excel Online Structured Activity: Merger Valuation with Change in Capital Structure Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a tw get capital structure consisting of 30 debt. Vandell's debt interest rate is 7.34. Assume that the riske free rate of interests and the market risk premium is 4%. Both Vandell and Hastings face 40% tax rate Vandells beta is 1.30. Hastings estimates that if it acquires Vandell, interest payments will be $1,600,000 per year for 3 years. The free cash flows are supposed to be 52.3 million, 52.9 million, 53.3 milion, and then 53.62 mbion in Years 1 through 4, respectively. Suppose Hastings will increase Vandell's level of debt at the end of year 3 to 5343 milion so that the target capital structure will be 45 debt. Assume that with this higher level of debt the interest rate would be 1.0%, and assume that interest payments in Year 4 are based on the new debt level from the end of Year 3 and new interest rate Free cash flows and tax sheds are projected to grow at 4% after year 4 The data has been collected in the Microsoft Excel Online Wie below. Open the spreadsheet and perform the required analysis to answer the questions below. X been spreadshee What is the value of the unlevered firm Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000, not 1.2. Do not round intermediate calculations. Round your answer to two decimal places 5 what is the value of the tax shield? Enter your answer in dollars. For example, an answer of $1.2 milion should be entered as 1.200,000, not 1.2. Do not round intermediate calculations. Round your answer to two decimal places $ What is the maximum total price that Hastings would bid for Vandell now? Assume Vandell now has $11.7 million in debt. Enter your answer in dollars. For example, an answer of $1.2 million should be entered 1,200.000, not 1.2. Do not found intermediate calculations, Round your answer to two decimal places Excel Online Structured Activity: Merger Valuation with Change in Capital Structure Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandel's debt interesate i 7.3%. Assume that the risk-free rate of interest is 4 and the market risk premium 4. Both Vandel and Hastings face a 4 tax rate Vandelsbeta is 1.30. Hastings estimates that if it acquires Vandell, interest payments will be $1,600,000 per year for 3 years. The free cash flows are supposed to be $2.5 million, 52.3 din 53.3 milion, and then 13.02 million in years through 4, respectively. Suppose Hastings will increase Vandelle level of debt at the end of Year 3 to $34.3 million so that the target capital structure will be 45 debt. Assame that with this higher level of debt the interest rate would be 8.0%, and assume that interest payments in Year 4 are based on the new debt level from the end of year and new interest rate Free cash flows and tax shields are projected to grow at 4 after Year 4. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below Open spreadsheet What is the value of the unlevered firm? Enter your answer in dollars. For example, an answer of 12 milion should be entered 1,200,000, not 1.2. Do not round Intermediate clations. Round your answer to the decimal places What is the value of the tax shield Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1.200.000, not 1.2. Do not round Intermediate calculations. Round your answer to two decimal places $ What is the maximum total price that Hastings would bid for Vandell now? Assume Vandell now has $11.87 million in debt. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000, no 1.2. Do not round Intermediate calculations. Round your answer to two decimal places, B V. Format Painter 4 ob ili IM = Clipboard Font Undo Alignmen B28 B 1 30.00% 70.00% 1,000,000 $11,870,000 7.30% 4.00% 4.00% 40.00% 1.30 $1,600,000 4.00% $2,300,000 $2,900,000 $3,300,000 $3.820,000 $34,300,000 8.00% Merger Valuation with Change in Capital Structure 2 3 Current target capital structure: 4 Debt 5 Equity 6 Number of common shares outstanding 7 Current debt amount 8 9 Debt interest rate 10 Risk-free rate 11 Market risk premium 12 Tax rate 13 Beta 14 Interest payments, Years 1 - 3 15 Growth rate 16 Free cash flow. Year 1 17 Free cash flow, Year 2 18 Free cash flow, Year 3 19 Free cash flow, Year 4 20 21 Level of debt, Year 3 22 New interest rate at higher debt level 23 New target capital structure: 24 Debt 25 Equity 26 27 Calculate target firm's levered cost of equity 28 29 30 Calculate target firm's unlevered cost of equity 31 su 32 33 Calculate target firm's unlevered value: 34 Unlevered horizon value of FCF 35 Unlevered value of operations 36 37 Calculate value of interest tax shields: 38 Taxshield, Year 1 39 Tax shield, Year 2 40 Tax shield, Year 3 41 Tax shield, Year 4 42 Tax shield, Horizon value 43 44 Value of tax shields 45 46 Calculate target firm's per share value to acquiring firm: 45.00% 55.00% Formulas #N/A #NA #N/A #N/A #NA #NA #NA #NA #NA #N/A Sheet1 x Excel Formulas Data Review View Insert Help Tell me what you want to do File Home Arial X Cut 10 A A = = 25 W Paste Copy Format Painter B I w. R ab 2. A Font Alignment Undo Cipboard B28 D A 13 Beta 14 Interest payments, Years 1.3 15 Growth rate 16 Free cash flow. Year 1 17 Free cash flow. Year 2 18 Free cash flow, Year 3 19 Free cash flow. Year 4 20 21 Level of debt, Year 3 22 New interest rate at higher debt level 23 New target capital structure: 24 Debt 25 Equity 1.30 $1,800,000 4.00% $2,300,000 $2,900,000 $3,300,000 $3,820,000 $34,300,000 8.00% 45.00% 55.0096 Formulas #N/A #N/A 27 Calculate target firm's lovered cost of equity 28 29 30 Calculate target firm's unlevered cost of equity 31 32 33 Calculate target firm's unlovered value: 34 Unlevered horizon value of FCF 35 Unlevered value of operations 36 37 Calculate value of interest tax shields: 38 Taxshield, Year 1 39 Tax shield, Year 2 40 Taxshield, Year 3 41 Taxshield, Year 4 42 Tax shield, Horizon value #N/A #N/A UNIA #N/A #N/A #N/A #NA NA UNIA #NA ANIA 44 Value of tax shields 45 46 Calculate targo firm's per share value to acquiring firm: 47 Value of operations 48 Target firm's equity value to acquiring firm 49 Por share value to acquiring firm 50 51 52 53 54 55 56 57 58 Excel Online Structured Activity: Merger Valuation with Change in Capital Structure Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a tw get capital structure consisting of 30 debt. Vandell's debt interest rate is 7.34. Assume that the riske free rate of interests and the market risk premium is 4%. Both Vandell and Hastings face 40% tax rate Vandells beta is 1.30. Hastings estimates that if it acquires Vandell, interest payments will be $1,600,000 per year for 3 years. The free cash flows are supposed to be 52.3 million, 52.9 million, 53.3 milion, and then 53.62 mbion in Years 1 through 4, respectively. Suppose Hastings will increase Vandell's level of debt at the end of year 3 to 5343 milion so that the target capital structure will be 45 debt. Assume that with this higher level of debt the interest rate would be 1.0%, and assume that interest payments in Year 4 are based on the new debt level from the end of Year 3 and new interest rate Free cash flows and tax sheds are projected to grow at 4% after year 4 The data has been collected in the Microsoft Excel Online Wie below. Open the spreadsheet and perform the required analysis to answer the questions below. X been spreadshee What is the value of the unlevered firm Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000, not 1.2. Do not round intermediate calculations. Round your answer to two decimal places 5 what is the value of the tax shield? Enter your answer in dollars. For example, an answer of $1.2 milion should be entered as 1.200,000, not 1.2. Do not round intermediate calculations. Round your answer to two decimal places $ What is the maximum total price that Hastings would bid for Vandell now? Assume Vandell now has $11.7 million in debt. Enter your answer in dollars. For example, an answer of $1.2 million should be entered 1,200.000, not 1.2. Do not found intermediate calculations, Round your answer to two decimal places Excel Online Structured Activity: Merger Valuation with Change in Capital Structure Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandel's debt interesate i 7.3%. Assume that the risk-free rate of interest is 4 and the market risk premium 4. Both Vandel and Hastings face a 4 tax rate Vandelsbeta is 1.30. Hastings estimates that if it acquires Vandell, interest payments will be $1,600,000 per year for 3 years. The free cash flows are supposed to be $2.5 million, 52.3 din 53.3 milion, and then 13.02 million in years through 4, respectively. Suppose Hastings will increase Vandelle level of debt at the end of Year 3 to $34.3 million so that the target capital structure will be 45 debt. Assame that with this higher level of debt the interest rate would be 8.0%, and assume that interest payments in Year 4 are based on the new debt level from the end of year and new interest rate Free cash flows and tax shields are projected to grow at 4 after Year 4. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below Open spreadsheet What is the value of the unlevered firm? Enter your answer in dollars. For example, an answer of 12 milion should be entered 1,200,000, not 1.2. Do not round Intermediate clations. Round your answer to the decimal places What is the value of the tax shield Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1.200.000, not 1.2. Do not round Intermediate calculations. Round your answer to two decimal places $ What is the maximum total price that Hastings would bid for Vandell now? Assume Vandell now has $11.87 million in debt. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000, no 1.2. Do not round Intermediate calculations. Round your answer to two decimal places