Problem $21-10$ Stock versus Cash Offers $($LO$2)$

Velcro Saddles is contemplating the acquisition of Skiers' Airbags Incorporated The values of the two companies as separate entities

are $$38$ million and $$19$ million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing

and administrative costs by $$590,000$ per year in perpetuity. Velcro Saddles considers offering Skiers' shareholders a $50\%$ holding in

Velcro Saddles. The opportunity cost of capital is $10\%.$

a$.$ What is the value of the stock in the merged company held by the original Skiers' shareholders?

Note: Do not round intermediate calculations. Enter your answer in millions rounded to $2$ decimal places.

b$.$ What is the cost of the stock alternative?

Note: Do not round intermediate calculations. Enter your answer in millions rounded to $2$ decimal places.

c$.$ What is the merger's NPV under the stock offer?

Note: A negative amount should be indicated by a minus sign. Do not round intermediate calculations. Enter your answer in

millions rounded to $2$ decimal places.