MERGER VALUATION Harrison estimates that if it acquires Van Buren, the year-end dividend will remain at $2.00 a share, but synergies will enable the dividend to grow at a constant rate of 7% a year (instead of the 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 1.1. What is the per-share value of Van Buren to Harrison Corporation?
Fundamentals of Financial Manageme...
Fundamentals of Financial Manageme...
MERGER VALUATION Harrison estimates that if it acquires Van Buren, the year-end dividend will remain at $2.00 a share, but synergies will enable the dividend to grow at a constant rate of 7% a year (instead of the 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 1.1. What is the per-share value of Van Buren to Harrison Corporation?
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