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Ziffy Corp. is considering an acquisition of Keedsler Motors Co., and estimates that acquiring Keedsler...

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Accounting

Ziffy Corp. is considering an acquisition of Keedsler Motors Co., and estimates that acquiring Keedsler will result in incremental after-tax net cash flows in years 13 of $17.00 million, $25.50 million, and $30.60 million, respectively. After the first three years, the incremental cash flows contributed by the Keedsler acquisition are expected to grow at a constant rate of 3% per year. Ziffys current beta is 1.60, but its post-merger beta is expected to be 2.08. The risk-free rate is 4%, and the market risk premium is 6.10%. Based on this information, complete the following table by selecting the appropriate values (Note: Do not round intermediate calculations, but round your answers to two decimal places):

Post-merger cost of equity

Projected value of the cash flows at the end of three years

The value of Keedsler Motors Co.s contribution to Ziffy Corp.

Keedsler Motors Co. has 3 million shares of common stock outstanding. What is the largest tender offer Ziffy Corp. should make on each of Keedsler Motors Co.s shares?

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