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 7.9%. Assume that the risk-free rate of interest is 5% and the market risk premium is 8%. 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 $1.407 million after which interest and the tax shield will grow at 6%. Synergies will cause the free cash flows to be $2.3 million, $2.7 million, $3.4 million, and then $3.75 million in Years 1 through 4, respectively, after which the free cash flows will grow at a 6% rate. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. B 30.00% 70.00% 1,000,000 $9,480,000 A 1 Merger Valuation 2 3 Current target capital structure: 4. Debt 5 Equity 6 Number of common shares outstanding 7 Current debt amount 8 9 Debt interest rate 10 Risk-free rate 11 Market risk premium 12 Tax rate 13 Beta 14 Interest payments, Years 1-3 15 Interest payment, Year 4 16 Growth rate 17 Free cash flow, Year 1 18 Free cash flow, Year 2 19 Free cash flow, Year 3 20 Free cash flow, Year 4 21 7.90% 5.00% 8.00% 35.00% 1.10 $1,500,000 $1,407,000 6.00% $2,300,000 $2,700,000 $3,400,000 $3,750,000 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 $9.48 million in debt. Do not round intermediate calculations. Round your answer to the nearest cent. $ per share 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 7.9%. Assume that the risk-free rate of interest is 5% and the market risk premium is 8%. 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 $1.407 million after which interest and the tax shield will grow at 6%. Synergies will cause the free cash flows to be $2.3 million, $2.7 million, $3.4 million, and then $3.75 million in Years 1 through 4, respectively, after which the free cash flows will grow at a 6% rate. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. B 30.00% 70.00% 1,000,000 $9,480,000 A 1 Merger Valuation 2 3 Current target capital structure: 4. Debt 5 Equity 6 Number of common shares outstanding 7 Current debt amount 8 9 Debt interest rate 10 Risk-free rate 11 Market risk premium 12 Tax rate 13 Beta 14 Interest payments, Years 1-3 15 Interest payment, Year 4 16 Growth rate 17 Free cash flow, Year 1 18 Free cash flow, Year 2 19 Free cash flow, Year 3 20 Free cash flow, Year 4 21 7.90% 5.00% 8.00% 35.00% 1.10 $1,500,000 $1,407,000 6.00% $2,300,000 $2,700,000 $3,400,000 $3,750,000 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 $9.48 million in debt. Do not round intermediate calculations. Round your answer to the nearest cent. $ per share
