Sweet Treats Co. is financed by 100 percent equity and has 20 million ordinary shares in issue currently trading at a price of 10.40. Sweet Treats Co. is considering a takeover of another all equity financed firm LuxChoc Co. which operating in the same industry. LuxChoc Co. has 8 million ordinary shares in issue with a share price of 7.00. Sweet Treats Co. estimates the takeover will generate synergy gains worth a present value of 10 million. The shareholders of LuxChoc Co. will accept an offer of a 20% premium on the current share price.

Required: (i) Calculate the post takeover value of a share in Sweet Treats Co. if the takeover is financed solely by cash. [5 marks]

(ii) In a share-for-share exchange, calculate how many shares Sweet Treats Co. would need to issue to the shareholders of LuxChoc Co.