Xander Inc. would like to acquire Kage Inc. for $100 million in cash. The following are the details on the proposed acquisition:

a. Estimate the synergy of the proposed acquisition?

b. What is the maximum price Xander Inc. will be willing to pay for Kage Inc.?

\begin{tabular}{|l|l|l|l|} \hline & Xander Inc. & Kage Inc. & Combined Firm \\ \hline Free Cash Flow (FCFF0) & $40 million & $5 million & $50 million \\ \hline Cost of Capital kWACc) & 10% & 12% & 10% \\ \hline Long term growth rate & 2% & 5% & 3% \\ \hline Capital Structure & 100% Equity & 100% Equity & 100% Equity \\ \hline \end{tabular}