Sales Acquirer Target Combined 500 120 620 Operating Expenses 200 60 260 Annual cost savings 40...

Transcribed Image Text:

Sales Acquirer Target Combined 500 120 620 Operating Expenses 200 60 260 Annual cost savings 40 EBIT 300 60 00 ?1? EBIT(1 - t) 240 48 42 ??? Depreciation. 40 20 ??? Gross Plant & 30 40 40 ??? Equipment Change in Working 10 5 ??? Capital Free Cash Flow to 240 23 ?2? Firm Discount rate 8.00% 9% 8% Firm Value 3000 255.56 ??? Long term debt 1000 100 1100 Equity value 2000 155.56 ?3? ?1? is ?2? is ?3? is The synergy of this merger is Sales Acquirer Target Combined 500 120 620 Operating Expenses 200 60 260 Annual cost savings 40 EBIT 300 60 00 ?1? EBIT(1 - t) 240 48 42 ??? Depreciation. 40 20 ??? Gross Plant & 30 40 40 ??? Equipment Change in Working 10 5 ??? Capital Free Cash Flow to 240 23 ?2? Firm Discount rate 8.00% 9% 8% Firm Value 3000 255.56 ??? Long term debt 1000 100 1100 Equity value 2000 155.56 ?3? ?1? is ?2? is ?3? is The synergy of this merger is