The Value of merged Firm (1/2) = $300.00. The Value of Firm 2 is determined by yearly cash flow as follows; Year 1 = $50.00, Year 2 = $30.00, Year 4 = - $15.00, Year 5 = $45.00 and in Year 12 = $14.00 to Perpetuity. The Cost of Capital for Firm 2 is; 0.42Debt at a cost of 8% and Equity at a cost of 12%. The corporate tax is at 37.00%. The Value of Firm 1 = $100.00 and Firm 1 will pay $125.00 in Cash for Firm 2. Find the Value of the Synergy and should the Firms (1) and (2) merge.

Question 25 options:

Synergy = $22.8265, Merge

Synergy = $148.9132, Merge

Synergy = $51.0867, Merge

Synergy = $39.7708, Merge