Merger Gains and Costs. Velcro Saddles is contemplating the acquisition of Skiers' Airbags Inc. The values of the two companies as separate entities are $$20$ million and $$10$ million

respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $$500,000$ per year in perpetuity. Velcro Saddles is willing to pay $$14$ million cash for Skiers'. The opportunity cost of capital is $8\%.($LO$21-2)$

a$.$ What is the gain from the merger?

b$.$ What is the cost of the cash offer?

c$.$ What is the NPV of the acquisition under the cash offer?

$10.$ Stock versus Cash Offers. Suppose that instead of making a cash offer as in Problem $9,$ Velcro Saddles considers offering Skiers' shareholders a $50\%$ holding in Velcro Saddles. $($LO$21-2)$

a$.$ What is the value of the stock in the merged company held by the original Skiers' shareholders?

b$.$ What is the cost of the stock alternative?

c$.$ What is the merger's NPV under the stock offer? only answer question $10$ a$-$c you just need the inoformstion from the previous question