Finance Unit 10

Complete the following problems from your textbook:

· Page 758: 21-1, 21-2, and 21-3.

Easy Problems 1-3

21-1 VALUATION Visscher currently expects to pay a year-end dividend of $1.99 a share (D1 = $1.99). Visscher’s dividend is expected to grow at a constant rate of 5% a year, and its beta is 0.8. What is the current price of Visscher’s stock?

21-2 MERGER VALUATION Hastings estimates that if it acquires Visscher, the year-end dividend will remain at $1.99 a share, but synergies will enable the dividend to grow at a constant rate of 7% a year (instead of the current 5%). Hastings also plans to increase the debt ratio of what would be its Visscher subsidiary; the effect of this would be to raise Visscher’s beta to 1.05. What is the per-share value of Visscher to Hastings Corporation?

21-3 MERGER BID On the basis of your answers to problems 21-1 and 21-2, if Hastings were to acquire Visscher, what would be the range of possible prices it could bid for each share of Visscher common stock?

Using Internet resources or the Capella University Library, research and write an essay on what must be done to improve ethics in finance and corporate governance. Your paper should be 4–6 pages in length, and include three outside references. Your writing should be well organized and clear. Writing structure, spelling, and grammar should be correct as well.