Seafood Inc., which has 1 million shares outstanding, wishes to merge with Fruity Drink with 2.5 million shares outstanding. The market prices for Seafood and Fruity are $49 and $18 per share, respectively. The merger would create an estimated savings of $800,000 annually for the indefinite future. If Seafood were willing to pay $24 per share of Fruity, and appropriate cost of capital is 14%, what would be the:

a. Present value of the merger gain or synergy?

b. Cost of the cash offer? Gain accrued to the shareholders of Fruity?

c. NPV of the offer?

d. Maximum price Seafood should offer?

e. If they agree to exchange stocks, find the NPV of the offer. Make comments in the change of the size of the NPV.

f. Which method, cash or stock exchange, is better for the acquiring firm?

g. Briefly explain two pre-offer and two post-offer tactics to prevent hostile takeover.