reinvestment rate remains unchanged, as do the other
assumptions in the valuation. The value of synergy is
estimated in the following table.
Thevalueofsynergyfrom thehigherreturnonprojects is
$55.07 million.
As an alternative,assume that thesynergy had manifested
itself not with higher returns on capital but as more
investmentopportunities.Inthiscase,wewouldhaveleftthe
after-taxreturnoncapitalunchangedat10.5%butincreased
thereinvestmentrateto90%.Thefollowingtablevaluesthe
resulting synergy: