Project Description:

hastings corporation is interested in acquiring vandell corporation. vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. vandell's debt interest rate is 7.2%. assume that the risk-free rate of interest is 3% and the market risk premium is 8%. both vandell and hastings face a 35% tax rate.

hastings estimates that if it acquires vandell, interest payments will be $1,500,000 per year for 3 years after which the current target capital structure of 30% debt will be maintained. interest in the fourth year will be $1.413 million after which interest and the tax shield will grow at 5%. synergies will cause the free cash flows to be $2.6 million, $2.7 million, $3.4 million, and then $3.61 million in years 1 through 4, respectively, after which the free cash flows will grow at a 5% rate. what is the unlevered value of vandell? vandell's beta is 1.10
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Price Type: Negotiable

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