Velcro Saddles is contemplating the acquisition of Pogo Ski Sticks, Inc. The values of the two companies as separate entities are $20 million and $10 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $500,000 per year in perpetuity. Velcro Saddles is willing to pay $14 million cash for Pogo. The opportunity cost of capital is 8%.

a.	What is the gain from merger? (Enter your answer in millions rounded to 2 decimal places.)

Gain from merger

$ million

b.	What is the cost of the cash offer? (Enter your answer in millions.)

Cost of the cash offer

$ million

c.	What is the NPV of the acquisition under the cash offer? (Enter your answer in millions rounded to 2 decimal places.)

NPV

$ million