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What would be the after-tax value of synergy created

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Question - Firms X and Z are perfectly competitive all-equity firms each with a 12% cost of capital. Firm X would like to acquire Firm Z. Each firm has estimated annual pre-tax cash flows of $280,000 for the foreseeable future. Pre-tax cash flows from the merged firm are expected to be $720,000. If the corporate tax rate is 25%, what would be the after-tax value of synergy created?

Reference no: EM133155745

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