Hi please explain in detail how to calcuate the first two. Expecially the part about ROE. I do not know where people get the percentages to calcuate this . Please help. ALSO PLEASE DO NOT COPY AND PASTE THE SOLUTION FROM THE OTHER PROBLEMS.

Homework for Chapter 9 End of chapter : 13, 14 Extra Homework for Chapter 9 1. Value of Synergy (Cost savings). The following are the details on two potential merger candidates, Northrop and Grumman, in 1993: Northrop $4,400.00 87.50% Grumman $3,125.00 89.00% Revenues Cost of Goods Sold (w/o Depreciation) Depreciation Tax Rate Working Capital Market Value of Equity Outstanding Debt $200.00 35.00% 10% of Revenue $2.000.00 $160.00 $74.00 35.00% 10% of Revenue $1,300.00 $250.00 Both firms are in steady state and are expected to grow 5% a year in the long term. Capital spending is expected to be offset by depreciation. The beta for both firms is 1, and both firms are rated BBB, with an interest rate on their debt of 8.5%. (The treasury bond rate is 7%.) 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 Grumman, operating independently. B. Estimate the value of Northrop, 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? Homework for Chapter 9 End of chapter : 13, 14 Extra Homework for Chapter 9 1. Value of Synergy (Cost savings). The following are the details on two potential merger candidates, Northrop and Grumman, in 1993: Northrop $4,400.00 87.50% Grumman $3,125.00 89.00% Revenues Cost of Goods Sold (w/o Depreciation) Depreciation Tax Rate Working Capital Market Value of Equity Outstanding Debt $200.00 35.00% 10% of Revenue $2.000.00 $160.00 $74.00 35.00% 10% of Revenue $1,300.00 $250.00 Both firms are in steady state and are expected to grow 5% a year in the long term. Capital spending is expected to be offset by depreciation. The beta for both firms is 1, and both firms are rated BBB, with an interest rate on their debt of 8.5%. (The treasury bond rate is 7%.) 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 Grumman, operating independently. B. Estimate the value of Northrop, 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