Online Activity: Merger Valuation with Change in Capital Structure on1 Escal Online Structured Activity: Merger Valuation with change in Capital Structure Hattings Corporation is interested in acquiring Vandell Corporation Vandell hasi million shares outstanding and target capital structure consisting of 30 debt Vandel's debt interest rate is 19. Assume that the risk-free rate of interest is and the market risk premium is 0%. Both Vandell and Hastings face a 35 tax rate Vandel's betais 1.40. 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 $2.5 million $3.1 million, 53.4 milion, and then $3.53 milion in years through 4, respectively. Suppose Hastings will increase Vandell's level of debt at the end or Year 3 to $27.6 million so that the target capital structure will be 4 debt. Assume that with this higher level of debt the interest rate would be 8.5%, and assume that interest payments in your are based on the new debt vel from the end of Year 3 ond new interest rate. Free cash rows and tax shields are projected to grow at 5 after 4 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet What is the value of the unlevered him? enter your answer in dollars. For example, an answer of $1.2 million should be entered os 1,200,000, not 1.2. Do not round Intermediate calculations, Round your answer to tio decimal places What is the value of the tax shield? Enter your answer in dollar. Por example, an answer of 1.2 milion should be entered a 1,200,000, no 1:2. Do not round Intermediate calculation. Round your answer to two decimal placet. $ What's the maximum total price that Hastings would bid for vandell now? Anome Vandell now has $10.00 million in debt, inter your answer in dollars. For example, an answer of 6.1.2 milion should be entered as 1,200,000, not 1.2. Do not found intermediate calculations, Round your answer to two decimal places Check My Won Res Problem Online Activity: Merger Valuation with Change in Capital Structure on1 Escal Online Structured Activity: Merger Valuation with change in Capital Structure Hattings Corporation is interested in acquiring Vandell Corporation Vandell hasi million shares outstanding and target capital structure consisting of 30 debt Vandel's debt interest rate is 19. Assume that the risk-free rate of interest is and the market risk premium is 0%. Both Vandell and Hastings face a 35 tax rate Vandel's betais 1.40. 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 $2.5 million $3.1 million, 53.4 milion, and then $3.53 milion in years through 4, respectively. Suppose Hastings will increase Vandell's level of debt at the end or Year 3 to $27.6 million so that the target capital structure will be 4 debt. Assume that with this higher level of debt the interest rate would be 8.5%, and assume that interest payments in your are based on the new debt vel from the end of Year 3 ond new interest rate. Free cash rows and tax shields are projected to grow at 5 after 4 The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below. Open spreadsheet What is the value of the unlevered him? enter your answer in dollars. For example, an answer of $1.2 million should be entered os 1,200,000, not 1.2. Do not round Intermediate calculations, Round your answer to tio decimal places What is the value of the tax shield? Enter your answer in dollar. Por example, an answer of 1.2 milion should be entered a 1,200,000, no 1:2. Do not round Intermediate calculation. Round your answer to two decimal placet. $ What's the maximum total price that Hastings would bid for vandell now? Anome Vandell now has $10.00 million in debt, inter your answer in dollars. For example, an answer of 6.1.2 milion should be entered as 1,200,000, not 1.2. Do not found intermediate calculations, Round your answer to two decimal places Check My Won Res
