Question
Hi, I need help with the question below. I've included instructions and please let me know if you need further information. Much appreciated! Please submit
Hi, I need help with the question below. I've included instructions and please let me know if you need further information. Much appreciated!
Please submit your answer as an excel spreadsheet, and please make sure to use Formulas in excel so i can see how the answers are derived.
Managers conclude that the combination of two firms will expand revenues through cross-selling of products, efficient exploitation of brands, and geographic and product line extension. They forecast new revenues of $100 million in the first year and $200 million in year 2, growing at 2.5% per year thereafter. The cost of goods underlying these new revenues is 45% of the revenues. To achieve these synergies will require an investment of $400 million initially, and 5% of the added revenue each year, to fund working capital growth. Find the net present value of these synergies using a discount rate of 15% and a marginal tax rate of 40%.
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