Velcro Saddles is contemplating the acquisition of Skiers Airbags Incorporated The values of the two companies as
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Velcro Saddles is contemplating the acquisition of Skiers Airbags Incorporated The values of the two companies as separate entities are $ million and $ million, respectively. Velcro Saddles estimates that by combining the two companies, it will reduce marketing and administrative costs by $ per year in perpetuity. Velcro Saddles considers offering Skiers shareholders a holding in Velcro Saddles. The opportunity cost of capital is
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 decimal places.
b What is the cost of the stock alternative?
Note: Do not round intermediate calculations. Enter your answer in millions rounded to decimal places.
c What is the mergers 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 decimal places.
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