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Gekko Properties is considering purchasing Teldar Properties.

This question was answered on Jul 19, 2016. View the Answer

Gekko Properties is considering purchasing Teldar Properties. Gekko's analysts project that the merger will result in incremental after-tax net cash flows of $2 million, $4 million, $5 million, and $10 million over the next four years. The terminal value of the firm's operations, as of Year 4, is expected to be $107 million. Assume all cash flows occur at the end of the year. The acquisition would be made immediately, if it is undertaken. Teldar's post-merger beta is estimated to be 1.7, and its post-merger tax rate would be 35%. The risk-free rate is 6%, and the market risk premium is 5.5%. What is the value of Teldar to Gekko Properties?

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to get NPV of telder to gekko; u need to find the discount rate k at which to discount... View the full answer

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Start: 100 mil 100 mil * (1-.35) =... View the full answer

Start: 100 mil 100 mil * (1-.35) =... View the full answer

1 comment
  • .$68,157,980
    • RayJack
    • Jul 19, 2016 at 8:48pm

Start: 100 mil 100 mil * (1-.35) =... View the full answer

to get NPV of telder to gekko; u need to find the discount rate k at which to discount the... View the full answer

Start: 100 mil 100 mil * (1-.35) =... View the full answer

 to get NPV of telder to gekko; u need to find the discount rate kat which to discount... View the full answer

Solution... View the full answer

9622558.xlsx

Here is a detailed explanation... View the full answer

Gekko.xlsx

Compute cost of capital using CAPM
Risk free rate
6%
Beta
1.7
risk premium
5.50%
Cost of capital
15.35% Year PV Cash Flow
1
$2,000,000
2
$4,000,000
3
$5,000,000
4 $117,000,000.00
$74,084,760.38...

This question was asked on Jul 19, 2016 and answered on Jul 19, 2016.

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