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Please show steps :) 1) Harrison Corp. is interested in acquiring Van Buren Corp. Assume that the risk free rate of interest is 5% and

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1) Harrison Corp. is interested in acquiring Van Buren Corp. Assume that the risk free rate of interest is 5% and the market risk premium is 6%. Van Buren currently expects to pay a year-end dividend of $2 a share (D, = $2.00). Van Burens dividend is expected to grow at a constant rate of 5% a year, and its beta is 0.9. Harrison estimates that if it acquires Van Buren, the year-end dividend will remain at $2, but synergies will enable the dividend to grow at a constant rate of 7% a year (instead of the current 5%). Harrison also plans to increase the debt ratio of what would be its Van Buren subsidiary, and the effect of this would be to increase Van Buren's beta to 1.1. What is the current price per share of Van Buren's stock? What is the per share value of Van Buren to Harrison Corp? Based on the analysis above, what is the range of possible prices that Harrison could bid for each share of Van Buren common stock? a) b) c)

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