Assume the Following Data If Firm a Intends to Pay $7 Million Cash for }

Multiple Choice

Assume the following data: $$\begin{array} { l c c c } & \text { Firm A } & \text { Firm B } & \text { Firm AB (after merger of } A \text { and B) } \\\text { Market Price per share } & \$ 20 & \$ 10 & \\\text { Number of shares } & 1,000,000 & 500,000 & \\\text { Market value of the firm } & \$ 20 \text { million } & \$ 5 \text { million } & \$ 30 \text { million }\end{array}$$
If Firm A intends to pay $7 million cash for Firm B,then calculate the cost of this merger.

A) $2 million
B) $3 million
C) $1 million
D) zero