U Corporation is considering the acquisition of Q Ltd. The values of the two companies as separate entities are $15 million and $7 million, respectively. U Corporation estimates that by combining the two companies it will reduce administrative costs by $180,000 per annum in perpetuity.U Corporation can either pay $8 million in cash for Q, or offer Q a 35 percent holding in U. If the opportunity cost of capital is 15 percent per annum. Your answer should be in millions and accurate to two decimal places (e.g., 10,500,000 should be entered as 10.50).

Tthe answer can have a decimal point but should not use other characters such as a comma.

(a)What is the gain, in present value terms, from the merger?(1 mark)

$ Blank 1 Million

(b)What is the net cost of the share alternative? (2 mark)

$ Blank 2 Million

(c)What is the NPV of the acquisition under the cash offer?(2 mark)

$ Blank 3 Million

(d)What is the NPV of the acquisition under the share offer?(1 mark)

$ Blank 4 Million