Please submit your answer as an excel spreadsheet, and make sure the instructer can access all formulas used.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 percent 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%.