weet Online Structui no. Activity: Merger Vahation with Change in Capital Structure Hastings Corporetion is interested in accuiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consistng of 30 os debt. Nandelis debt interest rate is 7.7%. Assume that the risk-free rate of interest is 5% and the market risk premium is 8%. Both Vandell and Hastings face a 35% tax Vandel's beta i5 1.10. Mastings estimates that if it acquires Vandell, interest payments wil be $1,500,000 per vear for 3 years. The free cash fioms are suppozed to $2.3 malion, $2.9 mullion, $3.4 mulion, and then $3.87million in Years 1 through 4, respectively, Suppose Hastings will wicrease Vandelis level of debt at the end of Year 3 to 534.7 mulion so that the target copital structure will be 45% debt. Assume that with this higher level of debe the interest rate would be 8.0%, and assume interest payments in Year 4 are based on the new debt level from the end of Year 3 and new interest rate. Free eash ilows and tax shields are projected to grow at 5 ? atter Yesa 4. The data has been collected in the Macrasoft Excel Online fle below. Open the spreadsheet and perfocin the required analysis to answer the questions below. Open sicadsheet What is the value of the unlevered firm? Enter yeor answer un dollars, for example, an answer of $1,2 inillon should bie entercd as 1,200, 000, not 1,2 . Do not round intermediate colculations. Round your answer to two decimal places. What is the value of the tax shiela? Enter your answer in dollar. for examsile, an answer of 51.2 melion ghobld be entered as 1,209,000, not 1.2. Do not roind intermedinte caiculations. Hound your answer to tao deomal places. therest paymein. Dased on the new debt leves from the end or year s and new interest rate: tree cast nows and tax shieids are projected to gf alter Yeat 4. The data has been collected in the Microsoft Excel Online file below. Open the spreadshect and perform the required analysis to answer the questions below. Open sprejdsheet What is the value of the unlevered firm? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000, not 1.2 . Do not ro intermediate calculatons. Round your answer to two decimal places. 5 What is the value of the tox shield? Enter your answer in dollbrs, For example, an answer of \$1.2 million should be entered as 1,200,000, not 1.2. Do not round intermediate calculations. Round your answer to two decimal places. 5 What is the maximum total price that Hastings would bid for Vandell now? Assume Vandell now has 510.78 million in debt. Enter your answer in dollars. for example answer of $1.2 mulion shouid be entered as 1,200,000, not 1.2. Do not round intermediate calculations. Round your answer to two decmal places
