A parts manufacturer is an acquisition target for your firm. The target has $51M in...
70.2K
Verified Solution
Link Copied!
Question
Accounting
A parts manufacturer is an acquisition target for your firm.
The target has $51M in debt capital, which has an average interest rate of 8.5%.
They have $80M in equity capital. The target's beta is 1.04, the risk free rate of return is 3%, and the market risk premium is 6%. The tax rate is 40%.
Your firm plans on making changes in the target's operations after the acquisition, so that the target firm's beta will be 0.65.
What is the required return for this acquisition?
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
- Unlimited Question Access with detailed Answers
- Zin AI - 3 Million Words
- 10 Dall-E 3 Images
- 20 Plot Generations
- Conversation with Dialogue Memory
- No Ads, Ever!
- Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Other questions asked by students
StudyZin's Question Purchase
1 Answer
$0.99
(Save $1 )
One time Pay
- No Ads
- Answer to 1 Question
- Get free Zin AI - 50 Thousand Words per Month
Best
Unlimited
$4.99*
(Save $5 )
Billed Monthly
- No Ads
- Answers to Unlimited Questions
- Get free Zin AI - 3 Million Words per Month
*First month only
Free
$0
- Get this answer for free!
- Sign up now to unlock the answer instantly
You can see the logs in the Dashboard.