Question: 2 Companies A Ltd. & B Ltd. are set to merge. This merger is not likely to result in any gains. A Ltd., which is

2 Companies A Ltd. & B Ltd. are set to merge.

This merger is not likely to result in any gains.

A Ltd., which is the Buyer is to issue Shares to the Shareholders of B Ltd., only to the extent of ensuring that the combined Earnings per share is Rs.3.2

A Ltd.

B Ltd.

Merged Entity

Market price per share Rs.

17.5

12

?

Number of Shares

60000

110000

?

Price Earnings Ratio

7

5

?

Total Earnings Rs.

?

?

?

Total Market Value Rs.

?

?

?

Earnings per share

2.5

3

3.2

(Marks)

A. Fill up all the Blanks in the above table

10

B. What will be the cost of Acquistion for A Ltd .?

2

C. How many New shares are to be exchanged for the Total shares in B Ltd.?

2

D.Exchange Ratio?

2

E. Calculate the Change in the Market Value of A Ltd. shares in comparison to their Market Value before merger

4

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