1. You have been given the job of evaluating the following merger candidate. You have collected...

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1. You have been given the job of evaluating the following merger candidate. You have collected the following cash flow for the acquisition candidate for the proposed merger (in millions): Projected cash flows for the target company: Year 1 Cash flows now 80 2 85 3 4 5 Thereafter per year 105 145 180 150 Additional cash flows with merger 60 90 100 125 150 100 Total cash flows with merger 140 175 205 270 330 250 Risk free rate of return 4.4% Beta for the acquiring company 1.2 Beta for this target company .8 Market risk premium Pre-tax cost of debt 5.0% 8.4% Current market price per share for the target company Percentage of the acquisition financed with debt Marginal tax rate Number of shares outstanding for the target company (millions) Percentage of the acquisition financed with common equity 40% 60% Using weighted average cost of capital of 7.43%, please run a net present value with the total cash flows from the target. 29% 43 $65 1. You have been given the job of evaluating the following merger candidate. You have collected the following cash flow for the acquisition candidate for the proposed merger (in millions): Projected cash flows for the target company: Year 1 Cash flows now 80 2 85 3 4 5 Thereafter per year 105 145 180 150 Additional cash flows with merger 60 90 100 125 150 100 Total cash flows with merger 140 175 205 270 330 250 Risk free rate of return 4.4% Beta for the acquiring company 1.2 Beta for this target company .8 Market risk premium Pre-tax cost of debt 5.0% 8.4% Current market price per share for the target company Percentage of the acquisition financed with debt Marginal tax rate Number of shares outstanding for the target company (millions) Percentage of the acquisition financed with common equity 40% 60% Using weighted average cost of capital of 7.43%, please run a net present value with the total cash flows from the target. 29% 43 $65