USE 323 HOMEWORK 4 INSTRUCTIONS Chapeers 20-21 L. Suppose that HCA and Tenet were to merge. Ignoring potential antitrust problems, how would this merger be classified? 2. List some reasons thest are good motives foe mergers. 3. Use the following data for a home health firm to answer questions Net income after taxes Depreciation $1,000,000 300,000 100,000 400,000 Working Capital Expenditures 500,000 1,000,000 400,000 Capital Expenditures Long-Term Debt Income Taxes 4. What is the carrent value of free cash flow? s. Using a 20 EBITDA (Eamings before Interest, Taxes, Depreciation and Amortization), what is the value of the firm's equity? 6. Dublin Medical (DM), a large established coeporation with no growth in its real earnings is considering acquiring 100% ofthe shares of Arlington Corporation, a young firm with a high growth rate of carnings. The aoquisitions analysis group at DM has produced the following table of relevant data: Dubin Medical Aringnon Eamings per share $3 00 Dividend per share 53.00 Number of shares 200 Stock price 52.00 $.80 10 million $20 million $30 DM's analysts estimate that investors currently expect growth of about 6% per year in Arlington's earnings and dividends. They assume that with the improvements in management that DM could bring to Arlington, its growth rate would be l0% per year beginning one year from now with no additional investment outlays beyond those already expected 7. What is the expected gain from the acquisition? . What is the net present value (NPV) of the acquisition to DM shareholders if it costs an average $30 per share to acquire all of the outstanding shares