Acquirer is considering purchasing Target. The standalone I/S (income statement) and estimated synergies for next year...

Transcribed Image Text:

Acquirer is considering purchasing Target. The standalone I/S (income statement) and estimated synergies for next year (year 1) are shown in the following table. Assume that the synergies will grow at a perpetual annual rate of 2% , the combined company's WACC is 10% and tax rate 30%. What is the total value of synergies? There are no synergies in capital expenditure or working capital. All figures are in $m. Sales CGS SG&A Depreciation Acquirer 300 100 50 70 Target 60 20 10 20 Synergy 20 -5 -3 O Acquirer is considering purchasing Target. The standalone I/S (income statement) and estimated synergies for next year (year 1) are shown in the following table. Assume that the synergies will grow at a perpetual annual rate of 2% , the combined company's WACC is 10% and tax rate 30%. What is the total value of synergies? There are no synergies in capital expenditure or working capital. All figures are in $m. Sales CGS SG&A Depreciation Acquirer 300 100 50 70 Target 60 20 10 20 Synergy 20 -5 -3 O

Answer rating: 100% (QA)

To calculate the value of synergies we need to find the incremental free cash flows generated by the ... View the full answer