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Calvert Ltd is interested in acquiring Jones industries.

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Calvert Ltd is interested in acquiring Jones industries. Jones has 2 million shares outstanding and a target capital structure consisting of 30% debt. Jones`s interest rate is 8.5%. Assume the risk free rate of interest is 5% and the market risk premium is 6%. Both companies have a 40% tax rate. Jones`s free cash flow is $5.25;a)Calculate the value of operations for the company being acquired;b)Calculate the maximum share price the purchasing company should offer

 

Paper#23262 | Written in 18-Jul-2015

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