East Coast Yachts, Inc., has been in merger talks with West Coast Sailboats for the past six months. After several rounds of negotiations, the offer under discussion is a cash offer of $$282$ million for West Coast Sailboats. Both companies have niche markets in the boating industry, and the companies believe a merger will result in significant synergies due to economies of scale in manufacturing and marketing, as well as significant savings in general and administrative expenses.

Larissa Warren, the president of East Coast Yachts, has been instrumental in the merger negotiations. In conjunction with Dan Ervin, the company$$s financial analyst, they have prepared the following pro forma financial statements for West Coast Sailboats, assuming the merger takes place. The financial statements include all synergistic benefits from the merger.

Dan is also aware that the West Coast Sailboats division will require investments each year for continuing operations, along with sources of financing. The table below outlines the required investments and sources of financing.

Larissa feels that the capital structure at West Coast Sailboats is not optimal. If the merger takes place, West Coast Sailboats will immediately increase its leverage with a $$57$ million debt issue, which would be followed by a $$76$ million dividend payment to East Coast Yachts. This will increase West Coast Sailboats$$ debt$-$equity ratio from $\mathrm{.}50$ to $1\mathrm{.}00.$ East Coast Yachts also will be able to use tax$-$loss carryforwards of $$12\mathrm{.}8$ million in both $2024$ and $2025$ from West Coast Sailboats$$ previous operations.

The total value of West Coast Sailboats is expected to be $$460\mathrm{.}8$ million in five years, and the company will have $$153\mathrm{.}6$ million in debt at that time. Stock in East Coast Yachts currently sells for $$94$ per share, and the company has $11\mathrm{.}6$ million shares of stock outstanding. West Coast Sailboats has $5\mathrm{.}2$ million shares of stock outstanding. Both companies can borrow at an $8$ percent interest rate. The risk$-$free rate is $6$ percent, and the expected return on the market is $13$ percent. Dan believes the current cost of capital for East Coast Yachts is $11$ percent. The beta for West Coast Sailboats stock given its current capital structure is $1\mathrm{.}30.$

Larissa has asked Dan to analyze the financial aspects of the potential merger. Specifically, she has asked Dan to answer the following questions.

$1.$ Suppose West Coast Sailboats$$ shareholders will agree to a merger price of $$63\mathrm{.}25$ per share. Should East Coast Yachts proceed with the merger?

$2.$ What is the highest price per share that East Coast Yachts should be willing to pay for West Coast Sailboats?