XYZ Inc., and Thor, Inc. have entered into a stock swap merger agreement whereby XYZ will pay a 20% premium over Thor's premerger price. The total synergy of the merger is estimated to be $3m. The table below contains necessary information to perform an NPV analysis for the merger.

Pre-merger share price

XYZ = $20 and Thor = $10

Number of shares

XYZ = 2m and Thor = 0.5m

Requirements:

(a) Calculate the number of shares XYZ will issue to exchange the shares of Thor.

(b) If XYZ instead proposes a cash offer. Calculate the offer price that will split the synergy equally between the two companies.