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

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

are $$60$ million and $$30$ million, respectlvely. Velcro Saddles estimates that by combining the two companies, It will reduce marketing

and administrative costs by $$700,000$ per year in perpetulty. Velcro Saddles considers offering Sklers' 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 Intermedlate calculatlons. Enter your answer In millions rounded to $2$ decimal places.

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

Note: Do not round Intermedlate calculatlons. Enter your answer In millions rounded to $2$ decimal places.

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

Note: A negatlve amount should be Indicated by a mInus slgn$.$ Do not round Intermedlate calculatlons. Enter your answer

In millions rounded to $2$ decimal places.