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1. Firm A has a total value of US$10 million and firm B has a total value of US$5 million. If the two firms merge,

1. Firm A has a total value of US$10 million and firm B has a total value of US$5 million. If the two firms merge, there will be a cost saving of US$2 million. Calculate any incremental gain from the merger.

2. Write a detailed note on the motives for merger.

3. Why diversification is not a valid reason for merger? Explain.

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