Hendrix Reality Incorporation(HRI) is contemplating the acquisition of Collins Air Incorporation(CAl). The values of the two companies as separate entities are $20 million and $10 million, respectively. HRI estimates that by combining the two companies, it will reduce marketing and administrative costs by $ 500,000 per year in perpetuity. The opportunity cost of capital is 8%. 1. If HRI is willing to pay $14 million cash for CAl, what is the NPV of this acquisition? 2. Instead of making a cash offer, HRI is considering an alternative to offer CAl shareholders a 50% holding in HRI after acquisition. What would be the NPV of this merger pursuing this route then?