Zinc Ltd is contemplating the acquisition of Copper Ltd. The values of the two companies as separate entities are $20 million and $10 million, respectively. Zinc estimates that by combining the two firms, it will reduce marketing and administrative costs by $500,000 per year in perpetuity. Zinc can either pay $14 million cash for Copper or offer Copper a 50% holding in Zinc. The opportunity cost of capital is 10%.

i) What is the gain from the merger?

ii) What is the cost of the cash offer?

iii) What is the cost of the stock alternative?