Elgin Golf Inc. has been in merger talks with Dutton Golf Company for the past six months. Aer several rounds of negotiations, the offer under discussion is a cash offer of $250 million for Button Golf. Both companies have niche markets in the golf club industry, and both believe that a merger will result in synergies due to economies of scale in manufacturing and marketing, as well as signicant savings in general and administrative expenses. Bruce Wayne, the nancial ofcer for Elgin, has been instrumental in the merger negotiations. Bruce has prepared the following pro forma nancial statements for Button Golf, assuming the merger takes place. The nancial statements include all synergistic benets from the merger. If Elgin Golf buys Button Golf, an immediate dividend of $6715 million would be paid from Dutton Golf to Elgin. Stock in Elgin Golf currently sells for SS7 per share, and the company has 18 million shares of stock outstanding. Dutton Golf has 8 million shares of stock outstanding. Both companies can borrow at an 8 percent interest rate. Bruce believes the current cost of capital for Elgin Golf is 11 percent. The cost of capital for Button Golf is 12.4 percent, and the cost of equity is 16.9I percent. In ve years, the value of Dutton Golf is expected to be $270 million. Bruce has asked you to analyze the nancial aspects of the potential merger. Specically, he has asked you to answer the following questions: 1. Suppose Dutton shareholders will agree to a merger price of 53 l .25 per share. Should Elgin proceed with the merger? 2. What is the highest price per share that Elgin should be willing to pay for Button