Merger valuation
Harrison Corporation is interested in acquiring Van Buren Corporation. Assume that the risk-free rate of interest is 6% and the market risk premium is 8%.
Harrison estimates that if it acquires Van Buren, the year-end dividend will remain at $2.80 a share, but synergies will enable the dividend to grow at a constant rate of 10% a year (instead of the current 6%). Harrison also plans to increase the debt ratio of what would be its Van Buren subsidiary - the effect of this would be to raise Van Buren's beta to 1.3. What is the per-share value of Van Buren to Harrison Corporation? Round your answer to the nearest cent.