Large plc is considering the takeover of Small plc. Large is currently valued at 60m on the stock market while Small is valued at 30m. The economies of scale and other benefits of the merger are expected to produces a market value for the combined firm of 110m. A bid premium of 20m is expected to be needed to secure Small. Transaction costs (advisers' fee, etc.) are estimated at 3m. Large has 30 million shares in issue and Small has 45 million. Assume that the managers are shareholder-wealth maximisers.

A. Does this merger create value for Large plc?

B. If the purchase is made with cash what will be the price offered for each of Small's shares?

C. What would be the value of each of Large's shares after this merger?