In April $2013,$ Montreal Inc. announced its plan to acquire Quebec Inc for $$5\mathrm{.}4$ billion.

The following are the details on two potential merger candidates, Montreal Inc and Quebec Inc, in $2012$:

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 $8\mathrm{.}5\%.($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 Quebec Inc, operating independently.

b$.$ Estimate the value of Montreal Inc, operating independently.

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