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CASE 3 (25 points) Firm Alpha is analysing the possible acquisition of Firm Beta. Both firms have no debt. There are two alternatives for Firm Alpha: to use cash or stock as payment You have the following premerger information Firm Alpha Fim Beta Price per share 80 40 Number of shares 100 40 Total market value 8,000 1,600 You estimate that the incremental value of the acquisition is 500 The board of Firm Beta has indicated that it will agree to a sale the price is 1,800, payable in cash or stock Instructions: What is the cost of each alternative? (5 points) b. What is the NPV of each alternative? (5 points) Which alternative should Fim Alpha choose? (5 points) What are some important factors in deciding whether to use stock or cash in an acquisition? (5 points) Explain what defensive tactics the managers of Firm Beta could use to resist acquisition. (5 points) c d