=+3* Box ple is considering the acquisition of Circle plc. The former is valued at £100m and the latter at £50m by the market. Economies of scale will result in savings of

£2.5m annually in perpetuity. The required rate of return on both firms and the com-

bination is 11 per cent. The transaction costs will amount to £1m.

Required a

What is the present value of the gain from the merger?