September 2023 In April 1994 Novell Inc announced its plan to acquire WordPerfect Corporation for 1 4billion A tthetimeoftheacquisition therelevantinformationaboutthetwo companies was as follows

2024 What Is The Synergy Worth? What Is The Maximum Price Novell Can Pay For WordPerfect? Assignment Help

In April 1994 Novell Inc announced its plan to acquire WordPerfect Corporation for 1 4billion A tthetimeoftheacquisition therelevantinformationaboutthetwo companies was as follows 2023

In April 1994, Novell, Inc. announced its plan to acquire WordPerfect Corporation for $1.4billion. A tthetimeoftheacquisition,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 Rate 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 will be offset by depreciation after the high-growth period. Neither firm has any debt outstanding. The treasury bond rate is 7%. a. Estimate the value of Novell, operating independently. b. Estimate the value of WordPerfect, operating independently. c. Estimate the value of the combined firm, with no synergy. d. As a result of the merger, the combined firm is expected to grow 24% a year for the high-growth period. Estimate the value of the combined firm with the higher growth. e. Whatis thesynergyworth? Whatisthe maximumpriceNovell canpayfor WordPerfect?

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