Haber Inter-national has just acquired Dasher Co. to create a multinational conglomerate, Haberdasher Industries. Prior to...

 

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Haber Inter-national has just acquired Dasher Co. to create a multinational conglomerate, Haberdasher Industries. Prior to the takeover, Dasher had a steady before-tax profit of $20 million per year and a debt-to-equity ratio of 1/3. Dasher's debt and equity had market betas of 0.1 and 1.5, respectively. Haber was an all-equity financed firm with an expected before-tax profit of $35 million per year and an equity beta of 1.3. Haber raised $100 million worth of bonds to finance the takeover. The debt of the combined company has a beta of 0.2. The returns on the market portfolio and the risk-free asset are 6% and 1%, respectively. The tax rate is 30%. What are the TD, TE, TA, and WACC of Dasher Co.? What are the debt, equity and overall values of Dasher Co.? What are the debt, equity and overall values of Haberdasher Industries? (Give the both answers assuming Dasher's debt is kept or not kept) What are the TD, TE, TA, and WACC of Haberdasher? (Give the both answers assuming Dasher's debt is kept or not kept) Haber Inter-national has just acquired Dasher Co. to create a multinational conglomerate, Haberdasher Industries. Prior to the takeover, Dasher had a steady before-tax profit of $20 million per year and a debt-to-equity ratio of 1/3. Dasher's debt and equity had market betas of 0.1 and 1.5, respectively. Haber was an all-equity financed firm with an expected before-tax profit of $35 million per year and an equity beta of 1.3. Haber raised $100 million worth of bonds to finance the takeover. The debt of the combined company has a beta of 0.2. The returns on the market portfolio and the risk-free asset are 6% and 1%, respectively. The tax rate is 30%. What are the TD, TE, TA, and WACC of Dasher Co.? What are the debt, equity and overall values of Dasher Co.? What are the debt, equity and overall values of Haberdasher Industries? (Give the both answers assuming Dasher's debt is kept or not kept) What are the TD, TE, TA, and WACC of Haberdasher? (Give the both answers assuming Dasher's debt is kept or not kept)

Answer rating: 100% (QA)

Answer To solve this problem we can use the weighted average cost of capital WACC formula and the formulas for the cost of debt rD and cost of equity ... View the full answer