I need help on this case ASAP.

The corporate tax rate is assumed to be 30%

Long Q.1: Brandy's marries Macintosh Macintosh SuperFood Ltd. operates a chain of 200 supermarkets in the Mid-West. The company had had a lackluster record and, since the death of its founder in late 2000, it had been regarded as a prime target for a takeover bid. In anticipation of a bid, Macintosh's share price moved up from $ 4 in November to a 12-month high of $ 5 on December 31, 2002 despite the fact that the stock market index as a whole was largely unchanged. Almost nobody anticipated a bid coming from Brandy's, a large operator of chain of supermarkets in the Mid-West and North-East; Brandy's management had, however, been contemplating a merger with Macintosh for some time. They believed that better management and inventory control in Macintosh's business, as well as closing of 15 Macintosh's marginal stores, could result in eliminating 450 employees and in cost savings worth $10 million per annum in perpetuity. Brandy's offer of one Brandy's share (trading at $10 on the day of the offer) for every Macintosh share stunned the Markets when it was announced at 5 PM on December 31, 2002. Brandy's plans to issue 15 million new shares to replace the Macintosh's 15 million shares. Macintosh's CEO and Brandy's CEO met on the evening of Jan.2. During that meeting they agreed to a \"small\" addition: The deal will be consummated on 1/ 02/04 [i.e., in one year]; at that time, \"every stockholder of Macintosh will have an option to exchange her Macintosh share for one share of Brandy's or to get $10 in cash\". With this addition both CEOs agreed to merge their firms on 1/ 02/04. DATA Macintosh's Balance Sheet on the 12/31/2002[Book Values]. Liabilities Assets Bank debt $ 0 Cash $ 10 million 8% bond due on 12/31/2015 1, $ 15 million Fixed assets $ 35 million 2,3 Stockholders equity $ 30 million Total liabilities $ 45 million Total assets $ 45 million Notes: 1. The yield to maturity on Macintosh's debt (for all maturities) currently is 8 percent. 2. Macintosh has 15 million shares outstanding, with market price of $5 a share. 3. Macintosh's equity beta is estimated at 1.25, the market risk premium is 8 percent, and the Treasury bill rate is 4 percent. Brandy's Balance Sheet on the 12/31/2002 [Book Values]. Liabilities Assets Bank debt $ 0 Cash $ 50 million 10% bond due on 12/31/2012 1, $ 500 million Fixed assets $ 500 million 2,3 Stockholders equity $ 50 million Total liabilities $ 550 million Total assets $ 550 million Notes: 1. The yield to maturity on Brandy's debt (for all maturities) currently is 10 percent. 2. Brandy's has 50 million shares outstanding, with market price of $10 a share. 3. Brandy's equity beta is estimated at 1.5, the market risk premium is 8 percent, and the Treasury bill rate is 4 percent. ii Q 1.1 (5 points) Calculate the market-required rate of return on Macintosh's and on Brandy's equity and the WACC for the two firms. Q 1.2 (5 points) Use the above data to calculate the capitalized value of future savings due to \"better management and inventory control in Macintosh's business as well as closing of 15 Macintosh's marginal stores\". [Hint: think what discount rate should you use. If you cannot choose, assume the discount rate to be 12.5%]. iii Q.1.3 (5 points) Present the Balance Sheets of Macintosh and Brandy's in market values. Calculate the D / E for each firm and compare their capital structures. iv Q.1.4 (10 points) Calculate the Market valuation of the two firms on 12/31/02. Explain why Brandy's stock beta is higher than Macintosh's. Then comment on following statements: 1.\"Macintosh could increase its value if it would borrow more \" 2.\"Macintosh's relatively small debt burden was a reason for its take-over\"\". Q.1 .5 (5 points) Brandy's management plans to raise an additional $100 MM debt after acquisition of Macintosh goes through. Why? Estimate the expected benefits from this move. v Q.1.6 (10 points) What kind of option was given to Macintosh's shareholders by agreement that \"every stockholder of Macintosh will have to exchange her Macintosh share on 1/02/04 for one share of Brandy's or to get $10 in cash\"? Why was there a need to give this option? What was the value of this option on 1/02/03? Who pays for this option? Elaborate Given: On 1/02/04 Macintosh will become part of Brandy's. On that day Brandy's shares will trade at one of the two values only: $11 or $8. . vi