As treasurer of Company A, you are investigating the possible acquisition of Company B. You have the following basic data: You estimate that investors currently expect a steady growth of about 6% in Bs earnings and dividends. Under new management this growth rate would be increased to 8% per year, without any additional capital investment required. .10 a. What is the gain from the acquisition? b. What is the cost of the acquisition if A pays $25 in cash for each share of B? c. What is the cost of the acquisition if A offers one share of A for every three shares of B? d. How would the cost of cash offer and the share offer alter if expected growth rate of B were not changed by the merger?

\begin{tabular}{l|cc} \hline \hline \multicolumn{1}{c|}{ Company } & A & B \\ \hline Next year's expected & $5.00 & $1.50 \\ Earnings per share & & \\ Next year's expected & $3.00 & $0.80 \\ Dividends per share & & \\ Number of shares & 1,000,000 & 600,000 \\ Stock price & $90 & $20 \\ \hline \hline \end{tabular}