In this question, we are tole that combining the business reduces operation cost (including depreciation) from 76% of sales to 70% of sales. Fair enough-when it came to adding back the depreciation to find the free cash flow, all that was simply dome was to add the capital allow of both companies and inflate at growth rate of the combined co.
Growth rate=6%
If we are going to be accurate-the synergy actually reduces the capital allowances by a relative figure of 6%-which is then cancelled out the the increase of 6%.
Is my logic right-or is this too tedious to do in the exam and we sould make similar assumptions like this answer and move on?
thanks
Growth rate=6%
If we are going to be accurate-the synergy actually reduces the capital allowances by a relative figure of 6%-which is then cancelled out the the increase of 6%.
Is my logic right-or is this too tedious to do in the exam and we sould make similar assumptions like this answer and move on?
thanks
