1. Merlo is analysing the possible acquisition of Eagle. Neither firm has debt. Merlo estimates that the value of the synergistic benefit from acquiring Eagle is 16.5 million. The current market values of Merlo and Eagle are 1.6 billion and 400 million, respectively. Merlo intents to offer 35 per cent of its equity to Eagle. Does it make economic sense for Merlo to proceed with acquisition? Show your calculations.