XYZ Ltd is considering the acquisition of ABC Ltd. Both companies are wholly equity financed and each has 5 million shares on issue. The annual net cash flows of XYZ and ABC are $1.2million and $1million respectively and these cash flows are expected to remain constant in perpetuity. The risk free rate is 6%. XYZ shareholders require a rate of return of 14% per annum. XYZ has a beta of 0.8, but ABC's operations are of higher risk and its beta is 1. After the takeover, XYZs net cash flow is expected to increase to $1.8m per annum in perpetuity and its beta is expected to increase to 1, and ABC's net cash flow is expected to decrease to $0.9m per annum in perpetuity with no change in risk. a. Calculate the deal synergy. (2 marks) b. What is the price per share at which ABC represents a zero net present value investment to XYZ? (2 marks) c. If XYZ offers $8m in cash for ABC, calculate the gains to shareholders of both firms. (2 mark) d. If the deal is settled with XYZ swapping 4 XYZ shares for 5 ABC shares, calculate the new XYZ share price after the deal, and the NPV of the deal for shareholders of both companies. (2 marks)