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LeftShoe Corp. has 8 million shares outstanding, each trading at $25 per share. RightShoe Corp. has 5 million shares outstanding, each trading at $40 per

LeftShoe Corp. has 8 million shares outstanding, each trading at $25 per share. RightShoe Corp. has 5 million shares outstanding, each trading at $40 per share. LeftShoe wants to acquire RightShoe. The acquisition will result in net synergies of $80 million as customers prefer bundled products. Assume that the pre-merger share prices reflect standalone values (that is, investors didnt anticipate acquisition). Suppose LeftShoe announces a stock offer to acquire RightShoe by issuing new shares at an exchange ratio that represents a 25% premium based on pre-merger prices. What is the NPV of the transaction to LeftShoe and what is the NPV of the transaction to RightShoe? What are the two share prices immediately after the announcement?

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