ABC has 1.00 million shares outstanding, each of which has a price of $19 . It has made a takeover offer of XYZ Corporation, which has 1.00 million shares outstanding, and a price per share of $2.59. Assume that the takeover will occur with certainty and all market participants know this. Furthermore, there are no synergies to merging the two firms.

a. Assume ABC made a cash offer to purchase XYZ for $3.01 million.

the price of ABC on announcement is ____

the price of XYZ on the announcement? is _____

What premium over the current market price does this offer represent?

b. Assume ABC makes a stock offer with an exchange ratio of 0.14 .

the price of ABC is ___ per share

the price of XYZ is _____ per share

What premium over the current market price does this offer represent?

c. At current market prices, both offers are offers to purchase XYZ for million. Does that mean that your answers to parts (a) and (b) must be identical? Explain.