As treasurer of Leisure Products, Inc., you are investigating the possible acquisition of Plastitoys. You have the following basic data:

	Leisure Products			Plastitoys
Forecast earnings per share	$	4		$	1.40
Forecast dividend per share	$	3		$	1.00
Number of shares	1,400,000			600,000
Stock price	$	80		$	40

You estimate that investors currently expect Plastitoyss earning and dividend to grow at a steady rate of 5% per year. You believe that Leisure Products could increase Plastitoys's growth rate to 6% per year, after 1 year, without any additional capital investment required. (Do not round your intermediate calculations. Round your answers to the nearest dollar. Use the minus sign to enter negative numbers if necessary. Enter your answers for costs as positive values.)

a. What is the economic gain from the acquisition?

b-1. What is the cost of the acquisition if Leisure Products pays $45 in cash for each share of Plastitoys?

b-2. What is the NPV to Leisure of acquiring Plastitoys?

c-1. What is the cost of the acquisition if Leisure Products offers 1 share of Leisure Products for every 1.9841 shares of Plastitoys?

c-2. What is the NPV to Leisure of acquiring Plastitoy?

d-1. Suppose immediately after the completion of the merger, everyone realizes that the expected growth rate will not be improved. Reassess the cost of the cash offer.

d-2. Reassess the NPV of the cash offer.

d-3. Reassess the cost of the share offer.

d-4. Reassess the NPV of the share offer.