he following are the details of two potential merger candidates, Nandlal and Gangalal :

Storage

Nandlal

$0$

Revenues

Rs$.4,400\mathrm{.}00$

Gangalal Rs$.3,125\mathrm{.}00$

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$260$ MB of $15$ GB used

Cost of goods sold

$($without depreciation$)$

$87\mathrm{.}50\%$

$89\mathrm{.}00\%$

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Depreciation

Tax rate

Rs$.200\mathrm{.}0035\mathrm{.}00\%$

Rs$.74\mathrm{.}00$

$35\mathrm{.}00\%$

$4279$

Working capital

$7$

$10\%$ of revenue

$10\%$ of revenue

Rs$.160\mathrm{.}00$

Rs$.1,300\mathrm{.}00$ Rs$.250\mathrm{.}00$

Market value of equity Rs$.2,000\mathrm{.}00$ Outstanding debt

Both firms are expected to grow $5\%$ a year in perpetuity. Capital spending is expected to be $20\%$ of depreciation. The beta for both firms is $1,$ and both firms are rated BBB$,$ with an interest rate on their debt of $8\mathrm{.}5\%($The Treasury bond rate is $7\%,$ and the risk premium is $5\mathrm{.}5\%.)$ As a result of the merger, the combined firm is expected to have a cost of goods sold of only $86\%$ of total revenues. The combined firm does not plan to borrow additional debt.

$($a$)$ Estimate the value of Gangalal, operating independently.

$($b$)$ Estimate the value of Nandlal, operating independently.

$($c$)$ Estimate the value of the combined firm, with no synergy.

$($d$)$ Estimate the value of the combined firm, with synergy.

$($e$)$ How much is the operating synergy worth