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 7.6%. Assume that the risk-free rate of interest is 7% and the market risk premium is 8%. Both Vandell and Hastings face a 30% tax rate. Vandell's beta is 1.30. Hastings estimates that if it acquires Vandell, interest payments will be $1,500,000 per year for 3 years. The free cash flows are supposed to be $2.3 million, $2.8 million, $3.3 million, and then $3.87 million in Years 1 through 4, respectively. Suppose Hastings will increase Vandell's level of debt at the end of Year 3 to $32.6million so that the target capital structure will be 45% debt. Assume that with this higher level of debt the interest rate would be 8.5%, and assume that interest payments in Year 4 are based on the new debt level from the end of Year 3 and new interest rate. Free cash flows and tax shields are projected to grow at 5% after Year 4 . 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. What is the value of the unlevered firm? 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 the tax shield? Enter your answer in dollars. For example, an answer of $1.2 million should be entered a 1,200,000, not 1.2. Do not round intermediate calculations. Round your answer to two decimal places. What is the maximum total price that Hastings would bid for Vandell now? Assume Vandell now has $10.91 million in debt. 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. Merger Valuation wth Change in Capltal Structure Current target capital structure: \begin{tabular}{lr|} \hline Debt & 30.00% \\ \hline Equity & 70.00% \\ \hline Number of common shares outstanding & 1,000,000 \\ \hline Current debt amount & $10,910,000 \\ \hline \end{tabular} \begin{tabular}{lr|} \hline Debt interest rate & 7.60% \\ \hline Risk-free rate & 7.00% \\ \hline Market risk premium & 8.00% \\ \hline Tax rate & 30.00% \\ \hline Beta & 1.30 \\ \hline Interest payments, Years 1-3 & $1,500,000 \\ \hline Growth rate & 5,00% \\ \hline Free cash flow, Year 1 & $2,300,000 \\ \hline Free cash flow, Year 2 & $2,800,000 \\ \hline Free cash flow, Year 3 & $3,300,000 \\ \hline Free cash flow, Year 4 & $3,870,000 \\ \hline \end{tabular} Level of debt, Year 3 New interest rate at higher debt level $32,600,000 New target capital structure: Debt Equity 45.00% 55.00% Calculate targot firm's lovered cost of equily fu Calculate target firm's unleverod cost of equily (ive Formulas Calculate targot firm's unlevered value: Unlevered horizon value of FCF Unlevered value of operations Calculate targot firm's levered cost of equity Formulas r11 HN/A Calculate target firm's unlevered cost of equity rul Calculate target firm's unlevored value: Unlevered horizon value of FCF Unlevered value of operations #N/A Calculate value of interest tax shields: Tax shield, Year 1 Tax shield, Year 2 Tax shield, Year 3 Tax shield, Year 4 Tax shield, Horizon value Value of tax shields Calculate targot firm's por share valuo to acquiring firm: Value of operations Target firm's equity value to acquiring firm Per share value to acquiring firm