The Sligo Co. is planning on acquiring Thorton Inc. Sligo currently has 2,300 shares of stock outstanding at a market price of $20 a share. Thorton has 1,800 shares outstanding at a price of $15 a share. Both firms are all-equity financed firms. Sligo has estimated that, after acquiring Thorton, its cash flow per year will increase by $800 permanently. The discount rate of the combined firm will be 10%.

1. (a) What is the value of Thorton to Sligo?

2. (b) If Thorton is willing to be acquired by $18 per share in cash, what is the cost of acquisition?

3. (c) What will the NPV of the acquisition to Sligo be assuming the condition in (b)?

4. (d) Assuming (b), what is the value of Sligo after acquisition?

5. (e) Suppose Thorton is willing to be acquired by $32,000 worth of Sligos stocks, what is the value of Sligo after acquisition?

6. (f) In part(e), what is the cost of acquisition?

7. (g) Assuming (e), what is the NPV of the acquisition to Sligo?

8. (h) Which one is better for Sligo, cash offer or stock offer?

9. (i) IfSligowantstomakeacounter-offerofstockacquisitiontoThortonsuchthatthe actual cost of acquisition is the same as cash acquisition in part (b), how many shares Sligo pay in exchange for 1 share of Thortons stock?