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They forecast new revenues of $100 million in the first year and $200 million in year 2, growing at 2.5% per year thereafter. The cost of goods underlying these new revenues is 45 percent of the revenues. To achieve these synergies will require an investment of $400 million initially, and 5% of the added revenue each year, to fund working capital growth. Find the net present value of these synergies using a discount rate of 15% and a marginal tax rate of 40%. How did you get the answer?

Financial Management, Finance

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