University of Technology Sydney

FM 77D

TUGAS KELOMPOK
Mergers and Acquisitions and Corporate Control
&
Bankruptcy, Reorganization & Liquidation
Dosen
Eduardus Tandelilin, M.B.A., Ph.D., Prof.
Disusun Oleh:
Kelompok 6 - MBA 79D
Jodi Prabowo (21/490138/PEK/28109)
Della Ayu Anggraeni (21/490381/PEK/28189)
Hana Zahra Aisyah (21/489881/PEK/28034)
PROGRAM STUDI MAGISTER MANAJEMEN
FAKULTAS EKONOMIKA DAN BISNIS
UNIVERSITAS GADJAH MADA
2022

Question :
22-4 Intrinsic Value of M&A Target
Hasting 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 1.4 (given
its target capital structure). Vandell has $10.19 million in debt that trades at par and pays an
8% interest rate. Vandell's current free cash flow (FCF ) is $2 million per year and is expected
to grow at a constant rate of 5% 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 5%, and the market risk
premium is 6%. Hasting's first step is to estimate the current intrinsic value of Vandell.
Diketahui :
Shares = 1,5 million
Debt = 30%
Beta = 1,4
Market risk premium (RPM) = 6%
g = 5%
Risk-free rate = 5%
Tax federal = 25%
Cost of debt = 8%
Weight of equity = 0,70
Debt = $10,19 million
Jawab
a. What is Vandell's cost of equity?
Answer:
rsL = rRF + [b × RPM]
= 5% + [1,4 × 6%]
= 13,4%
b. What is its weighted average c