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I Online ter X westcengagenow.com/ilm/takeAssignment/takeAssignmentMain.do ment: Chapter 21 - Mergers and Acquisitioas ons Problem 21.02 Save ExitSubmit Check My Work ( remaining eBook Problem 21-2 Merger valuation Harrison Corporation is interested in acquiring Ven Buren Harrison estimates thatit acquires van Buren, the year-end dividend wil remain at $2.25 a current Van Buren to Harrison Corporation? Round your answer to the nearest cent Corporation. Assume thatthe risk-free rate of interest is 6% and the market risk premium is 8%. share, but synergies wil enable the dvidend to grow at a constant rate of 7% a rear dnstead of the 4%), Harrison also plans to increase the debt ratio of what would be its van Buren debt ratio of what would be its Van Burern subsidary the effect of this would be to raise Van Buren's beta to 1.3. What is the per-share vakue of subsidary the effect of t Buren's beta to 1.3. What is the per-share valkue of Check My Work (a remaininp) Question 2 of 10 Problem 21.02 229 PMMExplanation / Answer
Required retrun = Risk free rate + beta * Market risk premium
= 6% + 1.3 * 8%
= 16.4%
Value of per share = Dividend to be paid / (Required return - Dividend growth)
= $2.25 / (16.4% - 7%)
= $23.94
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