Cepoor is evaluating Hultva as its acquisition target. Hultva has 684,000 shares outstanding. The current...
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Cepoor is evaluating Hultva as its acquisition target. Hultva has 684,000 shares outstanding. The current market price for Hultva's shares is $46, but that is following a $40 Tender Offer price proposed just a month ago by another firm, Kilroy, which could not tender all the needed shares. In the year prior to any acquisition discussions, Hultva's share price was around $36. The book value of equity is $16 mln. The book value of debt for Hultva is $12 mln and its bonds are trading at par, so the market value of debt is also $12 mln. The YTM on Hultva's bonds is 8%. The cost of equity for Hultva is 15%. Hultva is subject to a 40% tax. Hultva's capital structure is similar to that of an average firm in its industry. Which discount rate is the closest to the one Cepoor should use to discount the cash flows it estimated for Hultva?
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