How much of incremental value created in this transaction

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1. What is the incremental value to shareholders projected in this merger? (Assume the restructuring cost is $330 million in year 1, $50 million in year 2, and $20 million in year 3. Synergy savings are $125 million in year 1, $250 million in year 2, $350 million in year 3 and $350 million in year 4, and it will grow at 3% per year forever after year 4. The corporate tax rate is 40% and the discount rate is 11%.)

2. How will this value of synergies be shared between the two merging firms in the proposed transaction?

3. Given that options, on average, are worth about 31% of the underlying value of the stock on the date of grant,

how much of incremental value created in this transaction will go to the CEOs of the two firms involved?

Reference no: EM131847025

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