Fly$-$By$-$Night Couriers is analyzing the possible acquisition of Flash$-$in$-$the$-$Pan Restaurants. Neither

firm has debt. The forecasts of Fly$-$By$-$Night show that the purchase would increase its annual aftertax

cash flow by $$350,000$ indefinitely. The current market value of Flash$-$in$-$the$-$Pan is $$7$ million. The

current market value of Fly$-$By$-$Night is $$20$ million. The appropriate discount rate for the incremental

cash flows is $8$ percent. Fly$-$By$-$Night is trying to decide whether it would offer $35$ percent of its stock

or $$11$ million in cash to Flash$-$in$-$the$-$Pan.

$($a$)$ What is the synergy from the merger?

$($b$)$ What is the value of Flash$-$in$-$the$-$Pan to Fly$-$By$-$Night?

$($c$)$ What is the cost to Fly$-$By$-$Night of each alternative?

$($d$)$ What is the NPV to Fly$-$By$-$Night of each alternative?

$($e$)$ What alternative should Fly$-$By$-$Night use?