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?