## (Solution Download) Sweet Cola Corp. (SCC) is bidding to take over Salty Dog Pretzels (SDP). SCC has 3,000 shares outsta

 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?

 NPV \$

 b-1. 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.)

 Selling price \$

 b-2. What will SDP sell for?

 Selling price \$

 b-3. 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.)

 Gains SCC % SDP %

 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.)

 Price \$

 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.)

 NPV \$

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