What is the synergy worth? what is the maximum price novell can pay


In April 1994, Novell, Inc. announced its delineation to win WordPerfect Corporation for

$1.4billion.

Atthetimeoftheacquisition,therelevantinformationaboutthetwo companies was as follows:

 

Novell

WordPerfect

Revenues

$1,200.00

$600.00

Costof Goods Sold (w/o Depreciation)

57.00%

75.00%

Depreciation

$42.00

$25.00

Tax Rate

35.00%

$25.00%

CapitalSpending

$75.00

$40.00

WorkingCapital(as%ofRevenue)

40.00%

30.00%

Beta

1.45

1.25

ExpectedGrowth Rebuke in Revenues/EBIT

25.00%

15.00%

ExpectedPeriod of High Growth

10years

10years

GrowthrateAfterHigh-GrowthPeriod

6.00%

6.00%

BetaAfterHigh-Growthperiod

1.10

1.10

Capital spending procure be offset by derogation behind the high-augmentation end. Neither decided has any debit unappropriated. The place-of-business fetter rebuke is 7%.

a. Estimate the prize of Novell, easy inconsequently.

b. Estimate the prize of WordPerfect, easy inconsequently. c. Estimate the prize of the fully decided, delay no synergy.

d. As a fruit of the merger, the fully decided is expected to amplify 24% a year for the high-augmentation end. Estimate the prize of the fully decided delay the preferable amplifyth.

e. Whatis thesynergyworth? Whatisthe maximumpriceNovell canpayfor WordPerfect?