After a merger, a company expects to have a $1,000 revenue synergy for each of the next five years. After year five, revenue synergy is expected to decline by 25% per year. The company expects Free Cash Flow to the Firm from the revenue synergy to be 35% of any dollars earned in the revenue synergy. The synergy is relatively risky and should be valued using a 17% discount rate (using the end of the period convention). What is the value of the synergy?

Answer rating: 100% (QA)

PV of the FCF from synergy for 5 years 10... View the full answer