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Q5) Lenzie Corporation, which has 1 million shares outstanding, wishes to merge with Kent Drinks with 2

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Q5) Lenzie Corporation, which has 1 million shares outstanding, wishes to merge with Kent Drinks with 2.5 million shares outstanding. The market prices for Lenzie Corporation and Kent Drinks are $49 and $28 per share, respectively. The merger could create an estimated savings of $900,000 annually for the indefinite future. If Lenzie Corporation were willing to pay $30 per share for Kent Drinks, and the appropriate cost of capital is 6%, what would be the:

a)        Present value of the merger gain? (1 Point)

b)        Cost of the cash offer? (1 Point)

c)        NPV of the offer? (2 Points)