Intrinsic Value of Merger target

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has $1\mathrm{.}5$ million shares outstanding and a target

capital structure consisting of $30\%$ debt; its beta is $1\mathrm{.}40($given its target capital structure$).$ Vandell has $$8\mathrm{.}25$ million in debt

that trades at par and pays an $8\%$ interest rate. Vandell's free cash flow $(FC{F}_0)$ is $$2$ million per year and is expected to

grow at a constant rate of $4\%$ a year. Vandell pays a $30\%$ combined federal$-$plus$-$state tax rate, the same rate paid by

Hastings. The risk$-$free rate of interest is $7\%,$ and the market risk premium is $8\%.$ Hasting's first step is to estimate the

current intrinsic value of Vandell.

a$.$ What is Vandell's cost of equity? Do not round intermediate calculations. Round your answer to two decimal places.

$\%$

$\%$

b$.$ What is its weighted average cost of capital? Do not round intermediate calculations. Round your answer to two decimal

places.

$\%$

c$.$ What is Vandell's intrinsic value of operations? $($Hint: Use the free cash flow corporate valuation model.$)$ Enter your

answer in millions. For example, an answer of $$1\mathrm{.}23$ million should be entered as $1\mathrm{.}23,$ not $1,230,000.$ Do not round

intermediate calculations. Round your answer to two decimal places.

$

million

d$.$ Based on this analysis, what is the minimum stock price that Vandell's shareholders should accept? Do not round

intermediate calculations. Round your answer to the nearest cent.

$

$/$ share