Tutorial q1 Honey Plc is considering a merger with Bee Plc. The following finacnial information is available: Honey 6 EPS DPS No of shares Share price 3.60 10m 60 Bee 8.80 5.28 5.5m 85 Tutorial qlcont Additional information: growth is forecast at 2.5% pa for both Honey and Bee. Post merger cost savings have been estimated as a one-off 15% increase in the two firms combined earnings. Dividend payout would increase proportionally. a) What is the merger gain? b) what is the cost of the acquisition if Honey borrows 650m and pays this amount in cash for Bee? c) what is the merger cost if Honey offers 1.65 shares in Honey for 1 share in Bee? Need to use the dividend valuation model: V = D/(r-g) This question is exam standard. Tutorial q1 Honey Plc is considering a merger with Bee Plc. The following finacnial information is available: Honey 6 EPS DPS No of shares Share price 3.60 10m 60 Bee 8.80 5.28 5.5m 85 Tutorial qlcont Additional information: growth is forecast at 2.5% pa for both Honey and Bee. Post merger cost savings have been estimated as a one-off 15% increase in the two firms combined earnings. Dividend payout would increase proportionally. a) What is the merger gain? b) what is the cost of the acquisition if Honey borrows 650m and pays this amount in cash for Bee? c) what is the merger cost if Honey offers 1.65 shares in Honey for 1 share in Bee? Need to use the dividend valuation model: V = D/(r-g) This question is exam standard