Sweet Cola Corp. (SCC) is bidding to take over Salty Dog

Pretzels (SDP). SCC has 3,000 shares outstanding, selling at $50

per share. SDP has 2,000 shares outstanding, selling at $17.50 a

share. SCC estimates the economic gain from the merger to be

$15,000.

a.

If SDP can be acquired for $20 a share, what is the NPV of the

merger to SCC?

$   

What will SCC sell for when the market learns that it plans to

acquire SDP for $20 a share? (Do not round intermediate

calculations. Round your answer to 2 decimal places.)

$   

$   

What are the percentage gains to the shareholders of each firm?

(Do not round intermediate calculations. Enter your answers

as a percent rounded to 2 decimal places.)

%  

%  

c.

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 $50, so instead of paying $20 cash, SCC issues .40 of its

shares for every SDP share acquired. What will be the price of the

merged firm? (Do not round intermediate calculations. Round

your answer to 2 decimal places.)

$   

d.

What is the NPV of the merger to SCC when it uses an exchange of

stock? (Do not round intermediate calculations. Round your

answer to 2 decimal places.)

$