Inputs

Current riskfree rate = 2.17%

Risk Premium = 5.93%

Dell EMC
Beta 0.74 1.15
Pre-tax cost of debt 5.00% 5.00%
Tax rate -8.81% 23.07%
Debt to Capital Ratio 79.46% 18.86%

Revenues 54142 14051

Operating Income (EBIT) -316 3909

Pre-tax return on capital -1.38% 11.54%

Reinvestment Rate = 40.00% 40.00%

Length of growth period = 5 5

Dell EMC
Cost of Equity = 6.55% 8.99%
After-tax cost of debt = 5.44% 3.85%
Cost of capital = 5.67% 8.02%

After-tax return on capital = -1.51% 8.88%

Reinvestment Rate = 40.00% 40.00%
Expected growth rate= -0.60% 3.55%

Value of Firm
PV of FCFF in high growth = $ -861.78 $ 7,961.54
Terminal value = $ -6,013.96 $ 45,613.73
Value of firm today = $ -5,426.91 $ 38,977.65

Value of Synergy
Value of independent firms $ 33,550.74
Value of combined firm $ 31,869.32
Value of synergy $ -1,681.42
After merger
1.74199
5.00%
28.23%
44.21%

68193
3593

13.63%
50.00%

Value of firm with synergy

12.50%
3.59%
8.56%

9.78%
50.00%
4.89%

$ 5,821.86
$ 39,275.03
$ 31,869.32

Outstanding Shares (EMC)

Share price (Without Synergic Gains)
Outstanding Shares (Dell)
Swap Ratio
Share price (Synergic Gains)
All Values in $ Mn

In terminal year
1.73

In terminal year (Weights based on terminal value)

12.42%
3.59%
8.52%

1,943,000,000
20.06
2,543,838,000
0.11
19.45
All Values in $ Mn DELL
EBIT -316
EBT -1215
Capital Employed 22844
ROCE -1.38%
Long Term Debt 11234
Interest expenses 899
Pre tax debt rate 8.00%
Total capital 14138
D/(D+E) Ratio 79.46%
Tax Expenses 107
Tax Rate -8.81%
Market rate 8.10%
Risk free rate 2.17%
Risk premium 5.93%

Total Asset 48192

Current Liablities 25348
Shareholders equity 2904
 EMC
3909
3762
33875
11.54%
5469
147
2.69%
28994
18.86%
868 107 868
23.07%
8.10%
2.17%
5.93%

45585
11710
23525
 EMC CORPORATION
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)

ASSETS
Current assets:
Cash and cash equivalents

Short-term investments

Accounts and notes receivable, less allowance for doubtful accounts of $90 and $72

Inventories

Other current assets

Total current assets

Long-term investments

Property, plant and equipment, net

Intangible assets, net

Goodwill

Deferred income taxes

Other assets, net

Total assets

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable

Accrued expenses

Income taxes payable

Short-term debt
Deferred revenue

Total current liabilities

Income taxes payable

Deferred revenue

Long-term debt

Other liabilities

Total liabilities

Commitments and contingencies (See Note M)

Shareholders’ equity:
Preferred stock, par value $0.01; authorized 25 shares; none outstanding

Common stock, par value $0.01; authorized 6,000 shares; issued and outstanding 1,943 and 1,985

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income (loss), net

Total EMC Corporation’s shareholders’ equity

Non-controlling interests

Total shareholders’ equity

Total liabilities and shareholders’ equity

December 31,

2015 2014

$ 6,549 $ 6,343

2,726 1,978

3,977 4,413

1,245 1,276

566 653

15,063 ###

5,508 6,334

3,850 3,766

2,149 2,125

17,090 ###

1,164 952

1,788 1,611

$ ### $ ###

$ 1,644 $ 1,696

3,123 3,141

609 852

1,299 —
 6,210 6,021

12,885 ###

461 306

4,592 4,144

5,475 5,469

480 431

23,893 ###

— —

19 20

— —

21,700 ###

(579 ) (366 )
21,140 ###

1,579 1,629

22,719 ###

$ ### $ ###
 EMC CORPORATION
CONSOLIDATED INCOME STATEMENTS
(in millions, except per share amounts)

Revenues:
Product sales

Services

Costs and expenses:

Cost of product sales

Cost of services

Research and development

Selling, general and administrative

Restructuring and acquisition-related charges

Operating income

Non-operating income (expense):

Investment income

Interest expense
Other income (expense), net

Total non-operating income (expense)

Income before provision for income taxes

Income tax provision

Net income

Less: Net income attributable to the non-controlling interests

Net income attributable to EMC Corporation
Net income per weighted average share, basic attributable to EMC Corporation common shareho

Net income per weighted average share, diluted attributable to EMC Corporation common share

Weighted average shares, basic

Weighted average shares, diluted

Cash dividends declared per common share

For the
Year Ended December 31,

2015 2014 2013

$ ### $ ### $ ###

11,190 ### 9,532

24,704 ### ###

5,809 5,738 5,650

3,904 3,453 3,099

3,167 2,991 2,761

8,533 7,982 7,338

450 239 224

2,841 4,037 4,150

94 123 128

(164 ) (147 ) (156 )

111 (251 ) (257 )

41 (275 ) (285 )
3,909
2,882 3,762 3,865

710 868 772

2,172 2,894 3,093

(182 ) (180 ) (204 )

$ 1,990 $ 2,714 $ 2,889
$ 1.02 $ 1.34 $ 1.39

$ 1.01 $ 1.32 $ 1.33

1,944 2,028 2,074

1,962 2,059 2,160

$ 0.46 $ 0.45 $ 0.3