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 $360,000 indefinitely. The current market value of Flash-in-the-Pan is $8 million. The current market value of Fly-By-Night is $226million. The appropriate discount rate for the incremental cash flows is 8 percent. Fly-By-Night is trying to decide whether it should offer 30 percent of its stock or $11million in cash to Flash-in-the-Pan.

a.What is the synergy from the merger? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)

Synergy value$

b.What is the value of Flash-in-the-Pan to Fly-By-Night? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)

Value$

c.What is the cost to Fly-By-Night of each alternative? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.)

Cost of cash$Cost of stock$

d.What is the NPV to Fly-By-Night of each alternative?

NPV cash$NPV stock$