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 $0.5 million per year in perpetuity. Assume that this amount is an after-tax gure. Velcro Saddles is informed that Pogo wants Velcro either to pay $14 million cash for Pogo or to offer Pogo a 50% shareholding in the new Velcro Saddles combined with Pogo. The opportunity cost of capital is 10%. Do not consider other factors that are not stated here. (a) What is the gain from the acquisition? (b) What is the NPV of the acquisition to Velcro Saddles under the suggested cash offer? (c) What is its NPV of the acquisition to Velcro Saddles under the suggested stock offer? ((1) What is the maximum shareholding (instead of 50%) Velcro Saddles could offer to Pogo in a stock swap transaction