Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and target...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and target capital structure consisting of 30% debt; it’s beta is 1.4 (given its target capital structure). Vandell has $10.82 million in debt that trades at par and pays an 8% interest rate. Vandell’s free cash flow (FCFo) is $2 million per year and is expected to grow at a constant rate of 5% a year. Vandell pays a 40% combined federal and state tax rate. The risk-free rate of interest is 5% and the market risk premium is 6%. Hastings’s first step is to estimate the intrinsic value of Vandell.

a. What are Vandell’s cost of equity and weighted average cost of capital?

b. What is Vandell’s intrinsic value of operation?

c. What is the current intrinsic value of Vandell’s stock?

(there are 2 answers already online, but I don't understand the b and c answers they did.

Solutions

Expert Solution

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.35 (given its target capital structure). Vandell has $11.83 million in debt that trades at par and pays an 7.3% interest rate. Vandell’s free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 4% a year. Both Vandell and Hastings pay a 35% combined federal...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.10 (given its target capital structure). Vandell has $10.09 million in debt that trades at par and pays a 7.6% interest rate. Vandell’s free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 5% a year. Both Vandell and Hastings pay a 30% combined federal...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.40 (given its target capital structure). Vandell has $8.27 million in debt that trades at par and pays an 7.3% interest rate. Vandell’s free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 4% a year. Both Vandell and Hastings pay a 30% combined federal...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.20 (given its target capital structure). Vandell has $12.00 million in debt that trades at par and pays an 7.3% interest rate. Vandell’s free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 6% a year. Both Vandell and Hastings pay a 40% combined federal...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.15 (given its target capital structure). Vandell has $10.05 million in debt that trades at par and pays an 7.1% interest rate. Vandell’s free cash flow (FCF0) is $1 million per year and is expected to grow at a constant rate of 4% a year. Both Vandell and Hastings pay a 40% combined federal...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.55 (given its target capital structure). Vandell has $10.09 million in debt that trades at par and pays an 7.4% interest rate. Vandell’s free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 4% a year. Both Vandell and Hastings pay a 35% combined federal...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.45 (given its target capital structure). Vandell has $10.87 million in debt that trades at par and pays an 7.4% interest rate. Vandell’s free cash flow (FCF0) is $1 million per year and is expected to grow at a constant rate of 4% a year. Both Vandell and Hastings pay a 35% combined federal...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.60 (given its target capital structure). Vandell has $11.45 million in debt that trades at par and pays an 7.5% interest rate. Vandell’s free cash flow (FCF0) is $1 million per year and is expected to grow at a constant rate of 4% a year. Both Vandell and Hastings pay a 30% combined federal...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.15 (given its target capital structure). Vandell has $9.61 million in debt that trades at par and pays an 7.2% interest rate. Vandell’s free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 5% a year. Both Vandell and Hastings pay a 30% combined federal...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a...

Hastings Corporation is interested in acquiring Vandell Corporation. Vandell has 1 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.55 (given its target capital structure). Vandell has $9.61 million in debt that trades at par and pays an 7.7% interest rate. Vandell’s free cash flow (FCF0) is $2 million per year and is expected to grow at a constant rate of 6% a year. Both Vandell and Hastings pay a 30% combined federal...

Subjects