could you solve part b

Avion Plc is a manufacturing company which is listed on the Irish Stock Exchange. The objective of the company's board is to maximise value for its shareholders. The Board has recently approved a new strategy which seeks growth by acquisition, and suitable target companies have been identified and reviewed. The Board members receive bonuses each year based on the company's earnings per share (EPS). The company is now considering Bionic Plc, a retail company quoted on the New York Stock Exchange, as a possible candidate for a takeover. The following information is available about the two companies: Earnings per share After-tax earnings Price-Earnings Ratio (pre-bid) Avion Plc 1.50 12,000,000 9 Bionic Pic 1.25 4,500,000 5 Following the detailed financial review, the following information is also available: 1) Synergies arising from the merger are expected to increase the group's cash flows by 240,000 per year in perpetuity, starting one year from now. 2) The merging of the two companies means that only one head-office premises will be required. Both companies will move to a larger office premises immediately and the two existing premises will be put up for sale. The Avion premises is expected to sell immediately for a pre-tax market value of 900,000, however the Bionic premises will take longer to sell due to its overseas location. Pre-tax proceeds of 400,000 are expected to be received one year from now for the Bionic premises. 3) The new premises purchased by the group will cost 1.4 million immediately. There is no tax liability arising from this. 4) The legal, financial, advisory, and other costs of completing the takeover are expected to amount to 168,000 after taxes immediately. 5) The relevant cost of capital is 15%. Both companies pay taxes at 25%. Required: (a) Estimate the pre-acquisition value of each company, on a per share basis and on a total basis. Explain what each company's EPS and PE ratio tell you about the respective companies and explain how these metrics are related. (8 marks) (b) Estimate the post-acquisition value of the Avion Group (i.e Avion and Bionic combined) assuming that the expected benefits of the acquisition are realised as above. Avion Plc is a manufacturing company which is listed on the Irish Stock Exchange. The objective of the company's board is to maximise value for its shareholders. The Board has recently approved a new strategy which seeks growth by acquisition, and suitable target companies have been identified and reviewed. The Board members receive bonuses each year based on the company's earnings per share (EPS). The company is now considering Bionic Plc, a retail company quoted on the New York Stock Exchange, as a possible candidate for a takeover. The following information is available about the two companies: Earnings per share After-tax earnings Price-Earnings Ratio (pre-bid) Avion Plc 1.50 12,000,000 9 Bionic Pic 1.25 4,500,000 5 Following the detailed financial review, the following information is also available: 1) Synergies arising from the merger are expected to increase the group's cash flows by 240,000 per year in perpetuity, starting one year from now. 2) The merging of the two companies means that only one head-office premises will be required. Both companies will move to a larger office premises immediately and the two existing premises will be put up for sale. The Avion premises is expected to sell immediately for a pre-tax market value of 900,000, however the Bionic premises will take longer to sell due to its overseas location. Pre-tax proceeds of 400,000 are expected to be received one year from now for the Bionic premises. 3) The new premises purchased by the group will cost 1.4 million immediately. There is no tax liability arising from this. 4) The legal, financial, advisory, and other costs of completing the takeover are expected to amount to 168,000 after taxes immediately. 5) The relevant cost of capital is 15%. Both companies pay taxes at 25%. Required: (a) Estimate the pre-acquisition value of each company, on a per share basis and on a total basis. Explain what each company's EPS and PE ratio tell you about the respective companies and explain how these metrics are related. (8 marks) (b) Estimate the post-acquisition value of the Avion Group (i.e Avion and Bionic combined) assuming that the expected benefits of the acquisition are realised as above