Artists Supplies Ltd (ASL) has 1 million shares outstanding which currently trade at a price of $10. It has made a takeover offer to the shareholders of Tally Ltd. Tally Ltd has 1 million shares outstanding with a current price per share of $2.50. Assume that the takeover will occur with certainty and the market knows this. Further, there are expected synergies of $800,000 expected from the merger. a) ASL decides to make a stock offer with an exchange ratio of 0.40.

Calculate the merger NPV, showing separately the synergies and the acquisition premium