Using the information below, Please answer and explain Question 5:

The definitive agreement reached by Abbott and St. Jude called for St. Jude shareholders to re- ceive $46.75 in cash and 0.8708 share of Abbott common stock. This represented a total consider- ation of $85 per share. Abbott expects the deal would be accretive to earnings per share and that the combined firm will earn double-digit financial returns within 5 years. Management expects annual pretax cost savings of $500 million to begin within 5 years following closing. For the firm to earn the returns promised by management, it must be able to realize expected annual pretax cost savings beginning in 2020. Failure to realize these expected savings in a timely manner can impact significantly synergy value. Also, it is unclear if the full cost of realizing these synergies has been m the projected savings. 5. What is the PV of the $500-million pretax annual cost savings expected to start in 2020? Assume the 6. What are the key valuation assumptions underlying the valuation of St. Jude Medical? Include 7. What is the maximum amount Abbott Labs could have paid for St. Jude Medical and still appropriate cost of capital is 10% and that the savings will continue in perpetuity. Show your work. both the valuation of St. Jude as a stand-alone business and synergy value. Be specific. earned its cost of capital? Did Abbott overpay for St. Jude based on the information given in the case? Explain your answer. [Hint: Use your answers to questions (1) and (5).]