Merger valuation and discounted cash flows

When a merger takes place between two companies to form a single firm, the target company does not continue grad to operate as a separate identity.

continues

Consider the following scenario:

does not continue

Newtown Propane Inc. is considering an acquisition of Pirtucon Co$.,$ and estimates that acquiring Pirtucon will result in incremental aftertax net cash flows in years $1-3$ of $$5$ million, $$7\mathrm{.}5$ million, and $$9$ million, respectively.

After the first three years, the incremental cash flows contributed by the Pirtucon acquisition are expected to grow at a constant rate of $5\%$ per year. Newtown's current beta is $0\mathrm{.}80,$ but its post$-$merger beta is expected to be $1\mathrm{.}04.$ The risk$-$free rate is $4\mathrm{.}5\%,$ and the market risk premium is $6\mathrm{.}60\%.$

Based on this information, complete the following table by selecting the appropriate values. $($Note: Round your intermediate calculations to two decimal places.$)$

Value

Post$-$merger cost of equity

Projected value of the cash flows at the end of three years

The value of Pirtucon Co$.\text{'}$s contribution to Newtown Propane Inc.

Pirtucon Co$.$ has $3$ million shares of common stock outstanding. What is the largest tender offer Newtown Propane Inc. should make on each of Pirtucon Co$.\text{'}$s shares?

$$33\mathrm{.}24$

$$49\mathrm{.}86$

$$41\mathrm{.}55$