You are leading a team on a MEA deal Suddenly your analyst has disappeared and you have the following unfinished spreadsheet. The acquirer and the target are assumed to have vero growth. Now it is up to you to finish this job. You also believe that the tax rate will be 20% when this merger closes, so you are using 20% as the corporate tax rate in this calculation Acquirer 500 200 Target 120 Combined 620 Operating Expenses Annual cost savings 60 260 30 300 60 45 712 240 LBIT1-0 Depreciation 72 40 20 mm 30 40 777 10 5 7 Equipment Change in Working Capital Free Cash How to Firm Discount rate Firm Value 240 23 722 BOOM 9% 3000 1200 Long term det Equity value 100 1300 1800 737 71? 12 30 40 ??? Gross Plant & Equipment Change in Working Capital 10 5 ??? 240 23 ?2? Free Cash Flow to Firm 8.00% Discount rate 996 8% 3000 Firm Value 255.56 ??? 1200 100 1300 Long term debt Equity value 1800 155.56 73? 21? is 727 is 737 is The synergy of this merger is The maximum offer you can make is