Calculate maximum exchange ratio that large ltd

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Reference no: EM132618578

Small Ltd. is being acquired by Large ltd. on a share exchange basis. Their selected data are as follows:

Large Ltd.

PAT (in Lacs)                       56

No. of shares (in Lacs)          10

EPS                                  5.6

P/E ratio                         12.5

Small Ltd.

PAT (in Lacs)                   21

No. of shares (in Lacs)     8.4

EPS                              2.5

P/E ratio                      7.5

Problem 1: Calculate

(i) Market Value per share (pre merger)

(ii) Maximum exchange ratio that Large Ltd. Should offer without the dilution of (a) EPS

Reference no: EM132618578

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