1. 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 about the two companies was as follows:

J. Revenues Cost of goods sold (without depreciation) Depreciation Tax rate Capital spending Working capital (as % of revenue) Beta Expected growth rate in revenues/EBIT Expected period of high growth Growth rate after high growth period Beta after high growth period N ovell $1,200.00 57.00% $42.00 35.00% $75.00 40.00% 1.45 25.00% 10 years 6.00% 1.10 WordPerfect $600.00 75.00% $25.00 35.00% $40.00 30.00% 1.25 15.00% 10 years 6.00% 1.10