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In that question, I checked the answer. But didn’t get how to calculate total cash flow ( Y1 to Y5 ,35,42, ……. 207). Can you please explain it??
For each year it is adding together the cash flows from the two companies and then adding on the after-tax synergy benefit of 70% x 10 = 7.
So year 1 = 20 + 8 + 7 = 35
Year 2 = 25 + 10 + 7 = 42
and so on 🙂
Sorry – it should be 7 (177 – 170)
Thank you for spotting the error – I will have it corrected.