Answer Happy

Ziffy Corp. is considering an acquisition of Keedsler Motors Co., and estimates that acquiring Keedsler will result in incremental after-tax net cash flows in years 1-3 of $14.00 million, $21.00 million, and $25.20 million, respectively. After the first three years, the incremental cash flows contributed by the Keedsler acquisition are expected to grow at a constant rate of 5% per year. Ziffy's current beta is 1.60, but its post-merger beta is expected to be 2.08. The risk-free rate is 5%, and the market risk premium is 7.10%. Based on this information, complete the following table by selecting the appropriate values (Note: Do not round intermediate calculations, but round your answers to two decimal places): Value Post-merger cost of equity Projected value of the cash flows at the end of three years The value of Keedsler Motors Co.'s contribution to Ziffy Corp. Keedsler Motors Co. has 6 million shares of common stock outstanding. What is the largest tender offer Ziffy Corp. should make on each of Keedsler Motors Co.'s shares? $25.65 $20.52 O $30.78