1. The following table shows some projected cash flows and the appropriate discount rate for each...

 

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1. The following table shows some projected cash flows and the appropriate discount rate for each set of cash flows. Fill in the values for letters A-H and calculate the stock price of the merged firm if it has $100 million of debt and 5 million shares of stock outstanding. nswer Firm A- before merger Firm B- before merger Total benefits from merger 8 20 Revenue enhancement 2.5 Cost reduction Tax shelters Firm AB after A and B are merged Net annual cash flow (perpetuity) 5 2 .5 33 16% 10% B Appropriate discount rate A 10% 5% C D E 12.5 Value 42.5 FGH Η 1. The following table shows some projected cash flows and the appropriate discount rate for each set of cash flows. Fill in the values for letters A-H and calculate the stock price of the merged firm if it has $100 million of debt and 5 million shares of stock outstanding. nswer Firm A- before merger Firm B- before merger Total benefits from merger 8 20 Revenue enhancement 2.5 Cost reduction Tax shelters Firm AB after A and B are merged Net annual cash flow (perpetuity) 5 2 .5 33 16% 10% B Appropriate discount rate A 10% 5% C D E 12.5 Value 42.5 FGH Η

Answer rating: 100% (QA)

Lets recalculate the stock price using the correct values A Firm AB after A and B are merged 33 mill... View the full answer