Big Inc. is about to acquire Small Inc. In the year after the acquisition, or Inc. anticipates that it will be able to grow Small Inc.'s earnings by $200,000 per year, Income is expected to grow by 1.5% each year after, The risk-free interest rate is 2.0%, the market risk premium is 5.5%. Big Inc. has a beta of 1.25 and Small Inc. has a beta of 0.8. 

What is the maximum that Big Inc. should be willing to pay for Small Inc.? Corporate tax rate is 35%.

Answer rating: 100% (QA)

Heres how to calculate the maximum price Big Incshould be willing to pay for Small Inc 1 Calculate t... View the full answer