Sweet Cola Corp. (SCC) is bidding to take over Salty Dog Pretzels (SDP). SCC has 3,000 shares outstanding, selling at $50 per share. SDP has 2,000 shares outstanding, selling at $17.50 a share. SCC estimates the economic gain from the merger to be $15,000.

a.	If SDP can be acquired for $20 a share, what is the NPV of the merger to SCC?

NPV

$

b-1.	What will SCC sell for when the market learns that it plans to acquire SDP for $20 a share? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Selling price

$

b-2.	What will SDP sell for?

Selling price

$

b-3.	What are the percentage gains to the shareholders of each firm? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

	Gains
SCC	%
SDP	%

c.

Now suppose that the merger takes place through an exchange of stock. On the basis of the premerger prices of the firms, SCC sells for $50, so instead of paying $20 cash, SCC issues .40 of its shares for every SDP share acquired. What will be the price of the merged firm? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Price

$

d.	What is the NPV of the merger to SCC when it uses an exchange of stock? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

NPV

$