Question
DTVT&T is about to merge with Wine Turner Networks and Studio if allowed by the Justice Department. DTVT&T's current dividend is $2, the risk-free
DTVT&T is about to merge with Wine Turner Networks and Studio if allowed by the Justice Department. DTVT&T's current dividend is $2, the risk-free rate is 2% and the market risk premium is 7.5%. DTVT&T's common stock has an expected annual constant growth rate in dividends of 3% and a beta of 0.6 without the merger. If the merger is allowed, DTVT&T's constant dividend growth rate would increase to 4% annually and the merged company's beta is expected to be 0.7. What would be the dollar change in value of DTVT&T's common stock in dollars if the merger is allowed?
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