Company X is considering acquiring company Y. You are provided with the information below. X Y EPS 4.00 1.00 Dividend/share 2.50 0.9 Number of shares 1 million 0.6 million Share price 80 24 Additionally, you estimate that investors currently expect a steady growth of about 6% in company Ys earnings and dividends. After the acquisition, this growth rate would increase to 7.75% per year, without any additional capital investment required.

a. Calculate the synergies from the acquisition?

b. What is the premium paid to company Ys shareholders from the acquisition if company X pays 30 in cash for each share of company X?

c. What would instead be the premium to company Ys shareholders from the acquisition if company X offers $12 cash plus one share of company X for every five shares of company Y? Comment.