Market Master Capital is analyzing the possible acquisition of Novo Clad Systems Inc. Neither form has debt. Market Master Capital has forecasted that the purchase would increase its annual after-tax cash flow by $675,000 indefinitely. Other pertinent details are as follows: Market Master Capital Novo Clad Systems Current Market Value $55,000,000 $16,000,000 # of Shares Outstanding 700,000 400,000 Cost of Capital 14.00% 12.00% Given the above information, Market Master Capital is trying to decide whether it should pay in stock or in cash. The firm is considering offering new shares at a conversion ratio of 0.50 shares of the merged firm for each share in the target firm or $20 million in cash to Novo Clad Systems Inc. A. What is the synergy from the merger? (3 Marks) B. What is the value of Novo Clad Systems Inc. to Market Master Capital? (3 Marks) C. What is the cost to Market Master Capital of each alternative? (5 Marks) D. Which alternative should Market Master Capital choose? Why? (3 Marks) E. What conversion ratio would make the firm indifferent between the two alternatives? (6 marks) Be sure to show all your work (i.e. supporting calculations)