Problem $21-9$ Merger Gains and Costs $($LO$2)$

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

are $$22$ million and $$11$ million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing

and administrative costs by $$510,000$ per year in perpetuity. Velcro Saddles is willing to pay $$13$ million cash for Skiers'. The

opportunity cost of capital is $10\%.$

a$.$ What is the gain from the merger?

Note: Enter your answer in millions rounded to $2$ decimal places.

b$.$ What is the cost of the cash offer?

Note: Enter your answer in millions.

c$.$ What is the NPV of the acquisition under the cash offer?

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