Acquiring firm Target firm

Beta 0.9 0.9

pretax cost of debt 5% 5%
debt to capital ratio 30% 30%
Revenues 1000 5000
operating income 50 25
pretax ROC 15% 15%
reinvestment rate 70% 70%
legth of the growth period 5 5
tax rate 30% 30%

FCFF=EBIT(1-t)*(1-r)

WACC 0.06545

growth rate=ROC(i-t)*r Synergy=

growth rate Base FCFF FCFF

1 FCFF1
2 FCFF2
3 FCFF3
4 FCFF4
5 FCFF5+TV

TV=FCFF6/(waccst-gst)

FCFF6 FCFF6

Wacc=Roc
new ROC stable=0.06545
rinvestment rate will change
r*ROC=g
rstable=g/ROC 0.64935064935065
combined firm value without synergy combined firm value with synergy

0.9 0.9
5% 5%
30 30
6000 5000
75 75
15% 15%
70% 70%
5 10
30% 30%

combined firm value with synergy-cmbined firm value without synergy

18.9 PV@0.06545
20.28915 19.0427988174011
21.780402525 19.1866765502652
23.3812621105875 19.3316413503306
25.0997848757157 19.4777014309258
1457.54392603573 1061.58869087306
1138.62750902198 firm value with synery

1430.59930697164
Synergy= 189.6475 million $
32.8322540949992
 Acquiring firm Target firm

Beta 0.9 0.9

pretax cost of debt 5% 5%
debt to capital ratio 30% 30%
Revenues 1000 5000
operating income 50 25
pretax ROC 15% 15%
reinvestment rate 70% 70%
legth of the growth period 5% 5%
tax rate 30% 30%

FCFF=EBIT(1-t)*(1-r)

WACC 0.06545

growth rate=ROC(i-t)*r Synergy=

growth rate Base FCFF FCFF

1 FCFF1
2 FCFF2
3 FCFF3
4 FCFF4
5 FCFF5+TV

TV=FCFF6/(waccst-gst)

FCFF6 FCFF6

Wacc=Roc
new ROC stable=0.06545
rinvestment rate will change
r*ROC=g
rstable=g/ROC 0.64935064935065
combined firm value without synergy combined firm value with synergy

0.9 0.9
5% 5%
30 30
6000 5000
75 90
15% 15%
70% 70%
5% 5%
30% 30%

combined firm value with synergy-cmbined firm value without synergy

15.75 PV@0.06545
16.907625 15.8689990145009
18.1503354375 15.988897125221
19.4843850921562 16.1097011252755
20.9164873964297 16.2314178591048
1214.6199383631 884.657242394218
948.85625751832 firm value w/o synery

1192.16608914304

27.3602117458327
 Acquiring firm Target firm

Beta 0.9 0.9

pretax cost of debt 5% 5%
debt to capital ratio 30% 30%
Revenues 1000 5000
operating income 50 25
pretax ROC 15% 15%
reinvestment rate 70% 70%
legth of the growth period 5% 5%
tax rate 30% 30%

FCFF=EBIT(1-t)*(1-r)

WACC 0.06545

growth rate=ROC(i-t)*r Synergy=

growth rate Base FCFF FCFF

1 FCFF1
2 FCFF2
3 FCFF3
4 FCFF4
5 FCFF5+TV

TV=FCFF6/(waccst-gst)

FCFF6 FCFF6

Wacc=Roc
new ROC stable=0.06545
rinvestment rate will change
r*ROC=g
rstable=g/ROC 0.64935064935065
combined firm value without synergy combined firm value with synergy

0.9 0.9
5% 5%
30 30
6000 5000
75 90
15% 15%
70% 70%
5% 5%
30% 30%

combined firm value with synergy-cmbined firm value without synergy

18.9 PV@0.06545
20.28915 19.0427988174011
21.780402525 19.1866765502652
23.3812621105875 19.3316413503306
25.0997848757157 19.4777014309258
1457.54392603573 1061.58869087306
1138.62750902198 firm value with synery

1430.59930697164
Synergy= 189.6475 million $
32.8322540949992