Problem 21-10 Stock versus Cash Offers (LO2) Velcro Saddles is contemplating the acquisition of Skiers' Airbags...

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Problem 21-10 Stock versus Cash Offers (LO2) Velcro Saddles is contemplating the acquisition of Skiers' Airbags Incorporated The values of the two companies as separate entities are $34 million and $17 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $570,000 per year in perpetuity. Velcro Saddles considers offering Skiers' shareholders a 50% holding in Velcro Saddles. The opportunity cost of capital is 6%. 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. > Answer is complete but not entirely correct. a. Value of the stock $ 60.50 million b. Cost of the stock $ 30.25 million c. NPV $ 30.25 million Problem 21-10 Stock versus Cash Offers (LO2) Velcro Saddles is contemplating the acquisition of Skiers' Airbags Incorporated The values of the two companies as separate entities are $34 million and $17 million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $570,000 per year in perpetuity. Velcro Saddles considers offering Skiers' shareholders a 50% holding in Velcro Saddles. The opportunity cost of capital is 6%. 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. > Answer is complete but not entirely correct. a. Value of the stock $ 60.50 million b. Cost of the stock $ 30.25 million c. NPV $ 30.25 million