Damodaran on Valuation_ Security Analysis for Investment and Corporate Finance ( PDFDrive )

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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:

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