Hewlett Packard and Compaq Exhibit 9 includes some conflicting information about the size of the synergies. So use the numbers and assumptions supplied below in your valuation. For the discount rate use your answer from the previous question. Assume that you are doing your calculations starting April 1, 2002 and that, as stated in the text of the case, the merger will allow the combined firm to have annual cost savings of $2.5 for the fiscal year that ends in October 2004 (and for every year after that). Likewise assume that there will be a pre-tax profit loss of $500 million for that same fiscal year. Make what you deem to be reasonable assumptions for costs savings and profit losses for the fiscal years ending in October 2002 and October 2003. Calculate your estimated value per share of the cost savings and profits losses assuming that there will be 3.019 billion shares outstanding and that the tax rate is 26%. (Be sure to account for inflation in your calculations.) 

What do you conclude about the management's assertion that the cost savings are worth $5 to $9 per share?