Simon Manufacturing Co. is planning to acquire Kulas Engineering in a two-step buyout. Kulas has 1,500,000 shares of common stock currently outstanding, and the market price is currently at P25 per share. The first step of the buyout would offer to purchase 51% of Kulas Engineering common stock for P30 per share. The second step would be to exchange each remaining share of Kulas common for a newly issued share of Simon Manufacturing convertible preferred stock, valued at 50% over the current market price of Simons common stock.

Simon Manufacturing's investment banker has suggested, as an alternative, a single-stage buyout at P32.50 per share for all of Kulas' common stock.

Required:

a) What is the total cost of the two-step buyout?

b) What is the total cost of the single step proposal?

c) If it wants to minimize the total cost of the acquisition, what should Simon Manufacturing do?