Part A (15 Marks) Ontario Tech has 10 million shares outstanding, each of which has a price of $8. It has made a takeover offer of Island Inc., which has 1.5 million shares outstanding and a price per share of $6. Assume that the takeover will occur with certainty and all market participants know this. Furthermore, there are no synergies to merging the two firms. a. Assume Ontario Tech made a cash offer to purchase Island Inc. for $11 million. What happens to the price of Ontario Tech and Island Inc. on the announcement? What premium over the current market price does this offer represent? Show your calculations. b. Assume Ontario Tech makes a stock offer with an exchange ratio of 0.80 (i.e., # of Ontario Tech stock per Island Inc. stock). What happens to the price of Ontario Tech and Island Inc. this time? What premium over the current market price does this offer represent? Show your calculations. Part B (15 Marks) Suppose Danone Foods Company is considering divesting one of its manufacturing plants. The plant is expected to generate free cash flows of $7.5 million per year, growing at a rate of 2.25% per year. Danone has an equity cost of capital of 9.25%, a debt cost of capital of 4%, a marginal corporate tax rate of 38%, and debt-to-equity ratio of 0.40. If the plant has average risk and Danone plans to maintain a constant debt-to-equity ratio, what after-tax amount must it receive for the plant for the divestiture to be profitable? Part C (15 Marks) The Canadian Tire Corporation has announced plans to acquire Mississauga Tire Corporation. Canadian Tire is trading for $16 per share and Mississauga Tire is trading for $14 per share, implying a premerger value of Mississauga Tire of approximately $180 million. If the projected synergies are $30 million, what is the maximum exchange ratio Canadian Tire could offer in a stock swap? If Canadian Tire wants to absorb all of the projected synergies what exchange ratio should they offer? What exchange ratio could be offered so both Canadian Tire and Mississauga Tire share the projected synergies equally