Company X (with $47 share price and 5,400 shares outstanding) is considering the possible acquisition of Company Y (with $18 share price and 1,400 shares outstanding). Neither firm has any outstanding debt. Company X has estimated that the value of the synergies from acquiring Company Y is $9,400.

(a) If Company Y is willing to be acquired for $21 per share in cash, what is the NPV of the merger?

(b) Assuming conditions in (a), what will the price per share be for the merged firm?

(c) What is the merger premium in part (a)?

(d) If Company Y is agreeable to a merger by an exchange of stock what will the price per share of the merged firm be if Company X offers one of its shares for every two of Company Y’s shares?

(e) What is the NPV of the merger assuming conditions in (d)?