Question 3. Voracious Ventures, Inc. has a current market value of $290 billion, with $116 billion in debt and 6.7 billion shares outstanding. Voracious is purchasing the real assets of Craven Corp. for $25 billion. Once held by Voracious, the real assets will have a value of $30 billion. The purchase is financed with new debt and internal cash. A brokerage cost of 2% must be paid on new debt. The brokerage cost is financed using internal cash. The tax rate is 35%. For each scenario, calculate the APV of the purchase, and the effect on the value of Voracious and its share price.

a. $10 billion in new debt is issued.

b. The current debt ratio is maintained.

The solutions are:

a. APV = 8.37, D_hat + E_hat = 323.5, P_hat - P = 3.5075

b. APV = 9.7023, D_hat + E_hat = 324.8837, P_hat - P = 3.1239

How do I get these answers? Thank you!