Npv of the synergies associated with acquisition

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A CFO is considering an acquisition of a target that is currently worth 3 billion dollars. The acquisition will produce annual after-tax cost savings of 70 million dollars. This annual cost savings is expected to begin in two years and to grow at the rate of inflation (assume it is 1%). In addition, the CFO expects that the acquisition will add an after-tax integration cost of 250 million dollars. Assume the integration cost will occur one year from now. The current discount rate of the acquirer is 10%.

The NPV of the synergies associated with this acquisition is?

Reference no: EM132753591

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