(Answered) Merger valuationharrison corporation is interested in

Finance

Merger Valuation

Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 4%, and the market risk premium is 5%.

Harrison estimates that if it acquires Van Buren, the year-end dividend will remain at $1.87 a share, but synergies will enable the dividend to grow at a constant rate of 8% a year (instead of current 5%). 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 1.15. What is the per-share value of Van Buren to Harrison Corporation? Do not round intermediate calculations.

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