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Hastings Corporation is interested in acquiring...

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Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt. Vandell's debt interest rate is 8%. assume that the risk free rate of interest is 5% and that the market premium is 6%. Both Vandell and Hastings face a 40% tax rate. Vandell's free cash flow (FCFo) is $2million per year and is expected to grow at a constant rate of 5% a year; its beta is 1.4. What is the value of Vandell's operations? If Vandell has $10.82 million in debt, what is the current value of Vandell's stock? (hint: use the corporate valuation model)

 

Paper#5372 | Written in 18-Jul-2015

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