ca you kindly explain calculation behind the sums and theory

5. Before their merger, Northrop and Grumman operating and financial metrics are as follows: Revenues (5m) Cost of goods sold (% of Rev) Depreciation ($m) Working capital (% of Rev) Ratio of debt to equity Northrop $4,400 87.5% $200 0.08 Grumman $3,125 89% $74 10% 0.19 Both firms are expected to grow at 5% a year in perpetuity. Both firms need to continue to invest in fixed assets at the rate of depreciation. The beta for both firms is 1 and their cost of debt is 8.5%. The corporate tax rate is 35%. The risk free rate is 7% and the equity market risk premium is 5.5% As a result of the merger, the combined firm will have both stronger purchasing power and market power. The cost of goods sold will fall to 86% of revenue. What's the value of the deal's synergies? Show your calculation and state your assumptions if required. (6-8 marks) 6. Pellagia lnc is a nationwide retail chain specializing in women's apparel. The company has 135 million shares outstanding, currently trading at $5.63 per shares. However, only 60% of the shares are actively traded in the market as the founder still holds 40%. The current debt outstanding is $140 million. The company holds $20 million in cash. Its operating metrics are: Revenue = $633 million, EBITDA = $57 million, and earnings attributable to stockholders = $38 million. a. What is the current enterprise value (EV) of Pellagia? b. Suppose you are asked to value Pellagia's shares based on its comparable firms? Do you think Pellagia is under or over-valued? Explain the basis of your valuation judgement. State your assumptions if required. (4-6 marks) Abercrombie & Fitch AnnTaylor Stores Corp. Limited Brands Inc. Price to Eamings 13.04 15.36 (3.40) EVI Sales 1.58 1.41 0.96