Box plc 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 combination is 11 per cent. The transaction costs will amount to 1m.

A. What is the present value of the gain form the merger?

B. If a cash offer of 70m is accepted by Circle's shareholders what is the value created for Box's shareholders?

C. If shares are offered in such a way that Circle's shareholders would possess one-third of the merged entity, what is the value created for Box's shareholders?