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Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 3% and the market risk premium is 6%. Harrison estimates that if it acquires Van Buren, the year-end dividend will remain at $1.90 a share, but synergies will enable the dividend to grow at a constant rate of 8% a year (instead of the current 6%). Harrison also plans to increase the debt ratio of what would be its Van Buren subsidiary - the effect of this would be to raise Van Buren's beta to 1.2. What is the per-share value of Van Buren to Harrison Corporation? Round your answer to the nearest cent.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91608004

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