Larissa has asked Dan to analyze the fi nancial aspects of the potential merger. Specifi cally, she has asked

Dan to answer the following questions.

1. Suppose West Coast Sailboatss shareholders will agree to a merger price of $68.75 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?

3. Suppose East Coast Yachts is unwilling to pay cash for the merger, but will consider a stock exchange.

What exchange ratio would make the merger terms equivalent to the original merger price of $68.75

per share?

4. What is the highest exchange ratio East Coast Yachts would be willing to pay and still undertake the

merger?