Sweet Cola Corp. (SCC) is bidding to take over Salty Dog Pretzels (SDP). SCC has 3,000,000 shares outstanding, selling at $50 per share. SDP has 2,000,000 shares outstanding, selling at $17.50 per share. This merger is expected to create an incremental after-tax cash flow of $1,500,000 on a perpetual basis due to economies of scale achieved. These two companies have the same risk in their cash flows, and the cost of capital of SCC is 15%.
a) Calculate the synergy of the merger.