Please do in excel and show formulas, thank you!!!

HANDOUT 5: THE VALUE OF SYNERGY-HIGHER GROWTH A TWO STAGE FCFF MODEL In April 1994 Novell Inc. announced its plan to acquire WordPerfect Corporation for $1.4 billion. At the time of the acquisition, the relevant information on the two companies was as follows: Novell WordPerfect Revenues $1,200.00 $600.00 Cost of Goods Sold (w/o 57.00% 75.00% Depreciation) Depreciation $42.00 $25.00 Tax Rate 35.00% 35.00% Capital Spending $75.00 $40.00 Working Capital (as % of 40.00% 30.00% Revenue) Beta 1.45 1.25 Expected Growth Rate in 25.00% 15.00% Revenues/EBIT Expected period of High Growth Growth rate After 6.00% 6.00% High-Growth Period Beta After High-Growth 1.10 1.10 period 10 years 10 years Capital spending will be offset by depreciation after the high-growth period. Neither firm has any debt outstanding. The treasury bond rate is 7%. Assume that market risk premium is 5.5%. A. Estimate the value of Novell, operating independently. B. Estimate the value of WordPerfect, operating independently. C. Estimate the value of the combined firm, with no synergy. D. As a result of the merger, the combined firm is expected to grow 24% a year for the high-growth period. Estimate the value of the combined firm with the higher growth. E. What is the synergy worth? What is the maximum price that Novell can pay for Wordperfect? HANDOUT 5: THE VALUE OF SYNERGY-HIGHER GROWTH A TWO STAGE FCFF MODEL In April 1994 Novell Inc. announced its plan to acquire WordPerfect Corporation for $1.4 billion. At the time of the acquisition, the relevant information on the two companies was as follows: Novell WordPerfect Revenues $1,200.00 $600.00 Cost of Goods Sold (w/o 57.00% 75.00% Depreciation) Depreciation $42.00 $25.00 Tax Rate 35.00% 35.00% Capital Spending $75.00 $40.00 Working Capital (as % of 40.00% 30.00% Revenue) Beta 1.45 1.25 Expected Growth Rate in 25.00% 15.00% Revenues/EBIT Expected period of High Growth Growth rate After 6.00% 6.00% High-Growth Period Beta After High-Growth 1.10 1.10 period 10 years 10 years Capital spending will be offset by depreciation after the high-growth period. Neither firm has any debt outstanding. The treasury bond rate is 7%. Assume that market risk premium is 5.5%. A. Estimate the value of Novell, operating independently. B. Estimate the value of WordPerfect, operating independently. C. Estimate the value of the combined firm, with no synergy. D. As a result of the merger, the combined firm is expected to grow 24% a year for the high-growth period. Estimate the value of the combined firm with the higher growth. E. What is the synergy worth? What is the maximum price that Novell can pay for Wordperfect