3rd Sum

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3.

a
We can value the firms before merger based on the below metric
PAT(1+g)/Ke-g

Firm H Firm I
PAT 12000 9600
g 6.00% 8.00%
Ke 10.00% 12.00%
Value 318000 259200

Value without synergy 577200


Now combined firm with synergy

Revenues 120000
COGS 66000
EBIT 54000
PAT 32400
Cost of capital 0.108981
Expected growth 0.068981
Value 865874.8

3.b

Value of synergy 288674.8

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