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You have been asked to value the synergy in a merger by your boss, who also happens to be an avid believer in Economic Value
You have been asked to value the synergy in a merger by your boss, who also happens to be an avid believer in Economic Value Added EVA As a result, you are given the following information on the two firms:
G & P is a diversified consumer product company with $ billion in capital invested, a return on capital of and a cost of capital of The firm is assumed to be in stable growth, and the EVA is expected to grow a year in perpetuity.
BandAdd is a smaller company that produces only perfumes. It has $ million in capital invested, earning a return on capital of with a cost of capital of This firm is also in stable growth, and the EVA is expected to grow a year in perpetuity.
Both firms have tax rates.
Using the above information, answer the following questions:
a Value G & P using the EVA approach. points
b Value BandAdd using the EVA approach. points
c As a result of the merger, you expect the firm to be able to lower its cost of capital to as a result of increased debt capacity and to post an increase in the combined operating income of as a result of economies of scale Estimate the value of synergy in this merger. points
Note: $ equals $ billion on your spreadsheet
please complete it as shown in the excel sheet I need all the nodes filled
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