BigCo is purchasing LittleCo. BigCo has a share price of $$20,$ with $100,000$ shares outstanding.

LittleCo has a share price of $$10,$ with $75,000$ shares outstanding. Big is purchasing all of Little$$s

shares, paying $80\%$ in cash and $20\%$ in equity. Big$$s cost of capital is $12\%,$ Little$$s is $16\%.$ If the

merger happens, there is a $50\%$ chance that starting $5$ years from today, Big$$s yearly net income

will go up by $$60,000$ per year. Big is paying a $$1\mathrm{.}25/$share premium for Little.