As treasurer of Company X, you are investigating the possible acquisition of Company Y

	Company X	Company Y
EPS	$5	$1.5
Dividend per share	$3	$0.8
No. of shares	10000000	600000
Stock Price	$90	$20

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.

(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?