Morgan Stanley Deck
Quick drill: a deal is $0.10 dilutive on 200M pro forma shares with a 25% tax rate. What pre-tax synergies are needed to break even?
Model answer
About $26.7M pre-tax. After-tax earnings gap = $0.10 x 200M shares = $20M; gross that up for taxes: $20M / (1 - 0.25) = $26.7M of pre-tax synergies. Sophistication points if there is time:…
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