Hastings Corporation is interested in acquiring Vandell Corporation. Hastings Corporation estimates that if it acquires Vandell Corporation, synergies will cause Vandells free cash flows to be $2.3 million, $3.1 million, $3.3 million, and $3.90 million at Years 1 through 4, respectively, after which the free cash flows will grow at a constant 6% rate. Hastings plans to assume Vandells $9.94 million in debt (which has a 7.5% interest rate) and raise additional debt financing at the time of the acquisition. Hastings estimates that interest payments will be $1.5 million each year for Years 1, 2, and 3. After Year 3, a target capital structure of 30% debt will be maintained. Interest at Year 4 will be $1.449 million, after which the interest and the tax shield will grow at 6%. Vandell currently has 1.5 million shares outstanding and a target capital structure consisting of 30% debt; its current beta is 1.10 (i.e., based on its target capital structure). Vandell and Hastings each have a 25% combined federal-plus-state tax rate. The risk-free rate is 6% and the market risk premium is 7%.

1. What is Vandells pre-acquisition levered cost of equity? What is its unlevered cost of equity? Do not round intermediate calculations. Round your answers to two decimal places.

   Pre-acquisition levered cost of equity: %

   Unlevered cost of equity: %

2. What is the intrinsic unlevered value of operations at t = 0 (assuming the synergies are realized)? Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Do not round intermediate calculations. Round your answer to the nearest cent.

   $ million

3. What is the value of the tax shields at t = 0? Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Do not round intermediate calculations. Round your answer to two decimal places.

   $ million

4. What is the total intrinsic value of operations at t = 0? What is the intrinsic value of Vandells equity to Hastings? What is the maximum price per share that Hastings should offer Vandells shareholders? Enter your answers for the value of operations and the equity value to acquirer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Do not round intermediate calculations. Round your answers to two decimal places.

   Value of operations: $ million

   Equity value to acquirer: $ million

   Maximum price: $ per share