Anteater Ltd has 1 million shares outstanding which currently trade at a price of $20.00. It has made a takeover offer to the shareholders of Tiger Ltd. Tiger Ltd has 1.3 million shares outstanding with a current price per share of $2.00. Assume that the takeover will occur with certainty and the market knows this. Further, the synergies expected from the merger amount to $750,000.

a) Assume Anteater makes a cash offer to purchase Tiger for $3million. What will happen toAnteater Ltd's share price when it makes the announcement?

b) Assume Anteater makes a stock offer with an exchange ratio of 0.15. What happens to the price of Anteater's shares when it makes the announcement?

c)In the case of the stock offer at 'b' above, what is the value of the offer to Tiger's shareholders? If the merger was to occur with certainty, what would Tiger's share price be when the announcementis made?

d) Why are the answers to a) and b) the same or different?

(please explain each step in detail)