Given the following information on Companies X and Y : $(1$C$)$ Using the equity valuation approach, determine the combined asset value and equity value if X

acquired Y and their combined EBIT were estimated to be $$180$ million:

$(1$D$)$ What is the equity merger premium?

$(1$E$)$ What is the maximum cash price per share that X could offer to buy Y $\text{'}$s equity?

$\backslash$table$[[$Company$,$x$,$Y$],[$EBIT$,$$$80$M$,$$$100$M$],[$Interest $($k$=$d$10),$$$30$M$,$$$25$M$],[$EBT$,$$$50$M$,$$$75$M$],[$tax $($t$=\mathrm{.}4),$$$20$M$,$$$30],[$EAT$,$$$30$M$,$$$45$M$],[$N$,5$ M$,5$ M$],[$EPS$,$$$6\mathrm{.}00,$$$9\mathrm{.}00],[$Beta$,1,1\mathrm{.}5],[$ks$\_($d$),0\mathrm{.}1,0\mathrm{.}1],[$K$\_($e$)=\mathrm{.}05+(\mathrm{.}05)$ Beta,$0\mathrm{.}10,0\mathrm{.}125],[$V$^($E$)=$EAT$/$s$\_($e $),$$$300$M$,$$$360$M$],[$V$^($e$)=$V$^($E$)/$n$,$$$60,$$$72]]$

Assume:

SML: $k_8=\mathrm{.}05+[\mathrm{.}05].$

Rate on debt for both firms: $kd=0\mathrm{.}10.$

The companies will last for a long time and will not make any new investments

Effective tax rate $=\mathrm{.}4$

No depreciation

Questions:

Determine the following:

$(1)k_s$ for X and Y

COST OF EQUITY FOR Y

$14$

$(1$B$)V_A,$ and $V_n$ for X and Y