# Hastings Corporation is interested in acquiring Vandell Corporation.

Vandell has 1.5 million shares outstanding and a target capital structure consisting of 30% debt; its beta is 1.40 (given its target capital structure). Vandell has $11.41 million in debt that trades at par and pays a 7.2% interest rate. Vandell's free cash flow (FCF0) is $1 million per year and is expected to grow at a constant rate of 4% a year. Vandell pays a 25% combined federal-plus-state tax rate, the same rate paid by Hastings. The risk-free rate of interest is 4%, and the market risk premium is 4%. Hasting's first step is to estimate the current intrinsic value of Vandell.

-What is Vandell's cost of equity? Do not round intermediate calculations. Round your answer to two decimal places.

- %

-What is its weighted average cost of capital? Do not round intermediate calculations. Round your answer to two decimal places.

- %

-What is Vandell's intrinsic value of operations? (Hint: Use the free cash flow corporate valuation model.) Enter your answer in millions. For example, an answer of $1.23 million should be entered as 1.23, not 1,230,000. Do not round intermediate calculations. Round your answer to two decimal places.

-$ million

-Based on this analysis, what is the minimum stock price that Vandell's shareholders should accept? Do not round intermediate calculations. Round your answer to the nearest cent.

-$ / share

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