Finance

posted by .

Caledonia last paid a dividend of $1 per share 2010. In 2007, the Caledonia paid a dividend of $0.84. This dividend growth rate is expected to be constant for the foreseeable future if the merger is not completed. If the merger is successful, the expected dividend for next year, that is, D1 is expected to be $1.03 and the new long-term growth rate will be 7.5% as a result of the merger.

14. What is the expected new beta value for the combined firm?

15. The risk-free rate is 7% and the market return is estimated as 12%. What is your estimate of the required return of investors in Caledonia before and after the merger?

16. What is the value of a share of Caledonia prior to the merger?

17. What is the new value of a share of stock in Caledonia, assuming the merger is completed?

18. Would you recommend that Caledonia go ahead with the merger?

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Finance questions

    1) growth rates The stock price of the company is $76 investors require a 14% rate of return on similar stocks If the company plans to pay a dividend of $5.00 next year the expected growth rate of the company's stock price is ______ …
  2. Finance. PLEASE HELP ME

    1) growth rates The stock price of the company is $76 investors require a 14% rate of return on similar stocks If the company plans to pay a dividend of $5.00 next year the expected growth rate of the company's stock price is ______ …
  3. Finance

    Cascade Mining ($28Mil Assets) has an estimated beta of 1.6. The company is considering the acquisition of Hanson Welding ($42 Mil assets) that has a beta of 1.2. Cascade last paid a dividend of $1 per share 2010. In 2007, the Cascade …
  4. finance

    Cascade Mining ($28Mil Assets) has an estimated beta of 1.6. The company is considering the acquisition of Hanson Welding ($42 Mil assets) that has a beta of 1.2. Cascade last paid a dividend of $1 per share 2010. In 2007, the Cascade …
  5. finance

    If general cereal common stock dividend was 0.79 in 2000 and the last dividend paid was 1.55 in 2010, what is the annual growth rate.
  6. Finance

    The Isberg Company just paid a dividend of $0.75 per share, and that dividend is expected to grow at a constant rate of 5.50% per year in the future. The company's beta is 1.25, the market risk premium is 5.00%, and the risk-free rate …
  7. Finance

    Hetfield and Ulrich, Inc., has an odd dividend policy. The company has just paid a dividend of $7 per share and has announced that it will increase the dividend by $5 per share for each of the next 4 years, and then never pay another …
  8. Finance

    MMK Cos. normally pays an annual dividend. The last such dividend paid was $2.3, all future dividends are expect to grow at a rate of 6 percent per year, and the firm faces a required rate of return on equity of 18 percent. If the …
  9. Finance

    Butler Corp paid a dividend today of $3.50 per share. The dividend is expected to grow at a constant rate of 8% per year. If Butler Corp stock is selling for $75.60 per share, the stockholders' expected rate of return is:
  10. finance

    3.The Lo Company earned $2.60 per share and paid a dividend of $1.30 per share in the year that just ended. Earning and dividend per share are expected to grow at a rate of 5% per year in the future. Determine the value of the stock:

More Similar Questions