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?