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Escal Online structured Activity: Merger Valuation with Change in Capital Structure Hastings Corporation is interested in acquiring Vandel Corporation. Vandel has 1 million shares outstanding

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Escal Online structured Activity: Merger Valuation with Change in Capital Structure Hastings Corporation is interested in acquiring Vandel Corporation. Vandel has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell's debt interest rate is 7 Assume that the risk-free rate of interest is and the market risk premium is. Both Vandell and Hastings face a tax rate. Vandell beta w 140. Hastings estimates that fit acquires Vandell, interest payments will be $1.500.000 per year for 3 years. The free cash flows are supposed to be $2.5 milion $3.1 milion 53.4 million, and then $3.53 min Years I though 4, respectively. Suppose Hastings will increase Vandell's level of debt at the end of Year 3 to $27.6 million so that the target capital structure will be 45 det. Assume that with the higher level of debt the interest rate would be 6.5W and assume that interest payments in year 4 are based on the new debt levet from the end of Year 3 and new interest rate Free cash flows and tax shields are projected to grow at after year The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the tequired analysis tower the question below. pen redes What is the value of the levered to enter your answer in dollars. For example, en antwer/51.2 mmor should be entered 1.200,000, o 1.2. Do not round intermediate calculations of Mound your art two decimal places What ie the vahe of the the enter your answer in cows. Por campin, awer of 12 monthould be entered 1,200,000, met 12. Do not round intermediate calculations, Round your answer to two decimal places 5 What is the maximum total price that ravings would bid for Vandel now? Assume Vendell now ** *10.09 mrton in dett. Enter your anomer in dollars. For example, an answer of 31.2 million should be entered a 1,200,000, not 1.2. Do not round intermediate calculation. Hound your awer to two decimat places Check My Work Reset Problem D E F F G H 26 27 Calculate target firm's levered cost of equity Formulas #NIA 30 Calculate target firm's unlevered cost of equity #NA WNIA WNA 12 33 Calculate target firm's unlevered value: 34 Unlevered horizon value of FCF 35 Unlovered value of operations 36 37 Calculate value of interest tax shields 30 Tax Shield. Year 1 39 Tax shield. Year 2 40 Tax shield Year 3 41 Taxshield, Year 4 12 Taxshield, Horizon value 43 44 Value of tax shields 45 46 Calculate target firm's per share value to acquiring fimm 47 Value of operations 4 Tiget firm's equity value to acquiring firm 49 Por share value to acquiring firm 50 51 52 53 #NA NA ANIA ANA NA ANA NA Escal Online structured Activity: Merger Valuation with Change in Capital Structure Hastings Corporation is interested in acquiring Vandel Corporation. Vandel has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell's debt interest rate is 7 Assume that the risk-free rate of interest is and the market risk premium is. Both Vandell and Hastings face a tax rate. Vandell beta w 140. Hastings estimates that fit acquires Vandell, interest payments will be $1.500.000 per year for 3 years. The free cash flows are supposed to be $2.5 milion $3.1 milion 53.4 million, and then $3.53 min Years I though 4, respectively. Suppose Hastings will increase Vandell's level of debt at the end of Year 3 to $27.6 million so that the target capital structure will be 45 det. Assume that with the higher level of debt the interest rate would be 6.5W and assume that interest payments in year 4 are based on the new debt levet from the end of Year 3 and new interest rate Free cash flows and tax shields are projected to grow at after year The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the tequired analysis tower the question below. pen redes What is the value of the levered to enter your answer in dollars. For example, en antwer/51.2 mmor should be entered 1.200,000, o 1.2. Do not round intermediate calculations of Mound your art two decimal places What ie the vahe of the the enter your answer in cows. Por campin, awer of 12 monthould be entered 1,200,000, met 12. Do not round intermediate calculations, Round your answer to two decimal places 5 What is the maximum total price that ravings would bid for Vandel now? Assume Vendell now ** *10.09 mrton in dett. Enter your anomer in dollars. For example, an answer of 31.2 million should be entered a 1,200,000, not 1.2. Do not round intermediate calculation. Hound your awer to two decimat places Check My Work Reset Problem D E F F G H 26 27 Calculate target firm's levered cost of equity Formulas #NIA 30 Calculate target firm's unlevered cost of equity #NA WNIA WNA 12 33 Calculate target firm's unlevered value: 34 Unlevered horizon value of FCF 35 Unlovered value of operations 36 37 Calculate value of interest tax shields 30 Tax Shield. Year 1 39 Tax shield. Year 2 40 Tax shield Year 3 41 Taxshield, Year 4 12 Taxshield, Horizon value 43 44 Value of tax shields 45 46 Calculate target firm's per share value to acquiring fimm 47 Value of operations 4 Tiget firm's equity value to acquiring firm 49 Por share value to acquiring firm 50 51 52 53 #NA NA ANIA ANA NA ANA NA

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