Merger and Acquisition Valuation and Analysis

An analysis of merger and acquisition valuation techniques and strategies used in corporate finance.

Lucas Allen

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Merger and Acquisition Valuation and AnalysisProblem 21-1ValuationHarrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 5% and the market risk premium is 5%.Van Buren currentlyexpects to pay a year-end dividend of $2.20 a share (D1= $2.20). VanBuren's dividend is expected to grow at a constant rate of 4% a year, and its beta is 0.8.What is the current price of Van Buren's stock? Round your answer to the nearest cent.$________2.eBookeBookeBookeBookeBookeBookProblem 21-2Merger valuationHarrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 4% and the market risk premium is 6%.Harrison estimates that if it acquires Van Buren, the year-end dividend will remain at $2.45 ashare, but synergies will enable the dividend to grow at a constant rate of 10% a year(instead of the current 4%). Harrison also plans to increase the debt ratio of what would beits Van Buren subsidiary-the effect of this would be to raise Van Buren's beta to 1.4. What isthe per-share value of Van Buren to Harrison Corporation? Round your answer to the nearest

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