Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell's debt interest rate is 7.4%. Assume that the risk-free rate of interest is 6% and the market risk premium is 5%. Both Vandell and Hastings face a 35% tax rate.

Hastings estimates that if it acquires Vandell, interest payments will be $1,500,000 per year for 3 years after which the current target capital structure of 30% debt will be maintained. Interest in the fourth year will be $1.474 million after which interest and the tax shield will grow at 4%. Synergies will cause the free cash flows to be $2.5 million, $2.9 million, $3.4 million, and then $3.60 million in Years 1 through 4, respectively, after which the free cash flows will grow at a 4% rate.

What is the unlevered value of Vandell? Vandell's beta is 1.10. 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 value of its tax shields? 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 per share value of Vandell to Hastings Corporation? Assume Vandell now has $11.82 million in debt. Do not round intermediate calculations. Round your answer to the nearest cent.

$ per share

Merger Valuation
Current target capital structure:
Debt	30.00%
Equity	70.00%
Number of common shares outstanding	1,000,000
Current debt amount	$11,820,000
Debt interest rate	7.40%
Risk-free rate	6.00%
Market risk premium	5.00%
Tax rate	35.00%
Beta	1.10
Interest payments, Years 1 - 3	$1,500,000
Interest payment, Year 4	$1,474,000
Growth rate	4.00%
Free cash flow, Year 1	$2,500,000
Free cash flow, Year 2	$2,900,000
Free cash flow, Year 3	$3,400,000
Free cash flow, Year 4	$3,600,000

Calculate target firm's levered cost of equity		Formulas
rsL	12.10%	=(B10+B11)*B13
Calculate target firm's unlevered cost of equity
rsU	10.69%	=(B4*B9)+(B5*B23)
Calculate target firm's unlevered value:
Unlevered horizon value of FCF
Unlevered value of operations
Calculate value of interest tax shields:
Tax shield, Year 1	$525,000	=B14*B12
Tax shield, Year 2	$525,000	=B14*B12
Tax shield, Year 3	$525,000	=B14*B12
Tax shield, Year 4	$515,900	=B15*B12
Tax shield, Horizon value	$8,019,970	=(B36*1.04)/(B26-B16)
Value of tax shields	$6,975,996	=B33/(1+B26)+B34/(1+B26)^2+B35/(1+B26)^3+(B36+B37)/(1+B26)^4
Calculate target firm's per share value to acquiring firm:
Value of operations
Target firm's equity value to acquiring firm
Per share value to acquiring firm