Weatherhead Bakery in considering acquiring Donuts Express. Their current stock price, number of shares outstanding and balance sheets are below:

Donuts Express

Assets $7 million	Debt $2 million
	Equity $5 million (200,000 shares at $25 each)

Weatherhead Bakery(Pre-deal)

Assets $60 million	Debt $10 million
	Equity $50 million (1M shares at $50 each)

Weatherhead Bakery -closing price: $50 & Shares Outstanding 1,000,000

Donuts Express- closing price: $25 & Shares outstanding: 200,000

Suppose that Weatherhead Bakery will announce the acquisition tomorrow, but is still unsure on how to finance the deal. Analyze the scenario below:

An all-cash deal for a target price of $32. New debt will be issued in order to finance this entire deal.

Calculate the following:

a) What is the premium offered for the stock?

b) How much will it cost Weatherhead Bakery to buy all outstanding shares of Donut Express?

c) Calculate Weatherhead Bakerys current leverage ratio (pre-deal) before acquiring Donuts Express. Keep in mind that new debt was issued in order to finance the deal. Use the formula: Leverage Ratio = Debt/(Debt + Equity).

d) Calculate Weatherhead Bakerys leverage ratio after acquiring Donuts Express. Use the same leverage ratio formula as in the previous question.

e) After the acquisition , how does Weatherhead Bakerys leverage ratio compare to the leverage ratio of an average US firm?