7. Lucite Co. is acquiring Mt. Gear Co. Prior to the merger, Lucite's equity has a total value of $600 million and that of Mt. Gear was worth $220 million. After the merger, Lucite is expected to have a market value of $900 million. Lucite is giving Mt. Gear shareholders a $100 million premium for their shares. In addition, Lucite incurred $3 million if acquisition costs. a. What is the net advantage to merging for Lucite? b. What is the total synergistic effect in this merger? By how much did the synergy exceed the premium and other acquisition costs. 8. Youhall has 4,000,000 shares outstanding that are trading at $25 each. Z-Rocks has 2,000,000 shares outstanding that are trading at $20 each. Youhall earns $2.00 per share, and Z-Rocks earns $2.50 per share. If the firms merge, their total combined earnings will be the same as before the merger. a. Calculate each firm's price earning ratio. b. Suppose Youhall acquires Z-Rocks in a stock-for- stock swap based on current market values. What is the exchange ratio? What happens to Youhall's earnings per share? e. Suppose that Youhall's managers believe that Youhall is profiting as long as its earnings per share do not decline as a result of the merger. What is the maximum number of shares offered to Z-Rocks stockholders that they can issue and achieve this? What is the exchange ratio