Company ACQ is planning to acquire Company TAR. ACQ currently has 1,600 shares outstanding and a share price of $55. TAR has 1,100 shares outstanding and a share price of $20. The synergy of the acquisition is estimated to be $11,000.

1. What exchange ratio between the 2 stocks would make the actual cost of the stock offer identical to the cost of the cash offer of $12? (Show your calculations).

2.What is the maximum exchange ratio ACQ could offer in a stock acquisition and still generate a positive NPV? What is the maximum cash offer ACQ (price per share) could make and still generate a positive NPV? Briefly explain your answers.