Merger NPV (LO6, 7) Chatham Foods, which has 1 million shares outstanding, wishes to merge with Kent Drinks with 2.5 million shares outstanding. The market prices for Chatham Foods and Kent Drinks are $49 and $18 per share, respectively. The merger could create an estimated savings of $800,000 annually for the indefinite future. If Chatham Foods were willing to pay $25 per share for Kent Drinks, and the appropriate cost of capital is 14 percent, what would be the:

1. Present value of the merger gain?

2. Cost of the cash offer?

3. NPV of the offer? PLEASE POST THE DETAILED STEPS TO GET TO THE ANSWERS. SOME WRITTEN EXPLANATION BESIDES EACH QUESTION MAY HELP THE STUDY.