Gekko Properties Is Considering Purchasing Teldar Properties

question 6

Multiple Choice

Gekko Properties is considering purchasing Teldar Properties.Gekko's analysts project that the merger will result in incremental after-tax cash flows of $2 million,$4 million,$5 million,and $10 million over the next four years.The horizon value of the firm's operations,as of Year 4,is expected to be $107 million.Assume all cash flows occur at the end of the year.The acquisition would be made immediately,if it is undertaken.Teldar's post-merger beta is estimated to be 2.0,and its post-merger tax rate would be 35%.The risk-free rate is 6%,and the market risk premium is 5.5%.What is the value of Teldar to Gekko Properties?

• A)$66,680,846
• B)$70,190,364
• C)$73,699,883
• D)$77,384,877
• E)$81,254,121

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Definitions:

Behavioral Genetics

The field of study that examines the role of genetic and environmental influences on behaviors.

Gene-environment Correlations

The concept that an individual's (genetically influenced) behaviors and preferences can shape their environment, which in turn impacts their development.

Evolutionary Mismatch

A concept that certain modern behaviors or environmental conditions may not align with those our ancestors evolved to face, potentially leading to negative health outcomes.

Evolutionary Psychology

An approach used in both social and natural sciences that analyzes the psychological framework through the lens of contemporary evolutionary theory.