Please show explanation, calculations, and do not write on paper, and i will give good review!

Firm Alpha is analysing the possible acquisition of Firm Beta. Both firms have no debt.

There are two alternatives for Firm Alpha: to use cash or stock as payment. You have the following premerger information:

Firm Alpha Firm Beta

Price per share 80 40

Number of shares 100 40

Total market value 8,000 1,600

You estimate that the incremental value of the acquisition is 500.

The board of Firm Beta has indicated that it will agree to a sale if the price is 1,800, payable in cash or stock.

Instructions:

a. What is the cost of each alternative?

b. What is the NPV of each alternative?

c. Which alternative should Firm Alpha choose?

d. What are some important factors in deciding whether to use stock or cash in an acquisition?

e. Explain what defensive tactics the managers of Firm Beta could use to resist acquisition.