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Velcro Saddles is contemplating the acquisition of Skiers' Airbags Incorporated. The values of the two companies as separate entities are $ 3 2 million and
Velcro Saddles is contemplating the acquisition of Skiers' Airbags Incorporated. The values of the two companies as separate entities
are $ million and $ million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing
and administrative costs by $ per year in perpetuity. Velcro Saddles is willing to pay $ million cash for Skiers'. The
opportunity cost of capital is
a What is the gain from the merger?
Note: Enter your answer in millions rounded to decimal places.
b What is the cost of the cash offer?
Note: Enter your answer in millions.
c What is the NPV of the acquisition under the cash offer?
Note: Do not round intermediate calculations. Enter your answer in millions rounded to decimal places.
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