When an acquirer assesses a potential target, the price the acquirer is willing to pay should be based on the value of:

The target firms total corporate value (debt and equity)

The target firms equity

The target firms debt

Consider the following scenario:

Ziffy Corp. is considering an acquisition of Keedsler Motors Co., and estimates that acquiring Keedsler will result in incremental after-tax net cash flows in years 13 of $14.00 million, $21.00 million, and $25.20 million, respectively.

After the first three years, the incremental cash flows contributed by the Keedsler acquisition are expected to grow at a constant rate of 6% per year. Ziffys current beta is 1.60, but its post-merger beta is expected to be 2.08. The risk-free rate is 5%, and the market risk premium is 7.10%.

Based on this information, complete the following table by selecting the appropriate values (Note: Do not round intermediate calculations, but round your answers 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 Keedsler Motors Co.s contribution to Ziffy Corp.	?

Keedsler Motors Co. has 6 million shares of common stock outstanding. What is the largest tender offer Ziffy Corp. should make on each of Keedsler Motors Co.s shares?

$25.65

$20.52

$30.78

$30.79