Stock versus Cash Offers. Suppose that instead of making a cash offer as in problem 8, Velcro

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Stock versus Cash Offers. Suppose that instead of making a cash offer as in problem 8, Velcro Saddles considers offering Pogo shareholders a 50 percent holding in Velcro Saddles.

a. What is the value of the stock in the merged company held by the original Pogo shareholders?

b. What is the cost of the stock alternative?

c. What is its NPV under the stock offer?

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Ali Khawaja

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