ABC has

$1\mathrm{.}001\mathrm{.}00$

million shares$$ outstanding, each of which has a price of

$ $18$$$18.$

It has made a takeover offer of XYZ$$ Corporation, which has

$1\mathrm{.}001\mathrm{.}00$

million shares$$ outstanding, and a price per share of

$ $2\mathrm{.}39$$$2\mathrm{.}39.$

Assume that the takeover will occur with certainty and all market participants know this.$$ Furthermore, there are no synergies to merging the two firms.

a$.$ Assume ABC made a cash offer to purchase XYZ for

$ $3\mathrm{.}04$$$3\mathrm{.}04$

million. What happens to the price of ABC and XYZ on the$$ announcement? What premium over the current market price does this offer$$ represent?

b$.$ Assume ABC makes a stock offer with an exchange ratio of

$0\mathrm{.}150\mathrm{.}15.$

What happens to the price of ABC and XYZ this$$ time? What premium over the current market price does this offer$$ represent?

c$.$ At current market$$ prices, both offers are offers to purchase XYZ for

$ $3\mathrm{.}04$$$3\mathrm{.}04$

million. Does that mean that your answers to parts

$($a$)$

and

$($b$)$

must be$$ identical? Explain.