Problem $21-6$ Stock versus Cash Offers $($LO$2)$

Sweet Cola Corporation $($SCC$)$ is bidding to take over Salty Dog Pretzels $($SDP$).$ SCC has $2,500$ shares

outstanding, selling at $$60$ per share. SDP has $1,500$ shares outstanding, selling at $$18\mathrm{.}50$ a share. SCC

estimates the economic gain from the merger to be $$18,000.$

a$.$ If SDP can be acquired for $$22$ a share, what is the NPV of the merger to SCC$?$

b$.$ What will SCC sell for, per$-$share, when the market learns that it plans to acquire SDP for $$22$ a

share?

Note: Do not round intermediate calculations. Round your answer to $2$ decimal places.

c$.$ What will SDP sell for, per share, if the market learns about the acquisition?

d$.$ What are the percentage gains to the shareholders of each firm?

Note: Do not round intermediate calculations. Enter your answers as a percent rounded to $2$

decimal places.

e$.$ Now suppose that the merger takes place through an exchange of stock. On the basis of the

premerger prices of the firms, SCC sells for $$60,$ so instead of paying $$22$ cash, SCC issues $0\mathrm{.}37$

of its shares for every SDP share acquired. What will be the price of the merged firm?

Note: Do not round intermediate calculations. Round your answer to $2$ decimal places.

f$.$ What is the NPV of the merger to SCC when it uses an exchange of stock?

Note: Do not round intermediate calculations. Round your answer to $2$ decimal places.

Answer is complete but not entirely correct.