Reference no: EM132618599
A ltd. wants to acquire T ltd. and has offered a swap ratio of 1:2 (0.5 shares of every one share of T ltd.) Following information is provided
A Ltd.
Profit after tax 18,00,000
Equity Share outstanding 6,00,000
EPS 3
Price/earning ratio 10
Market price per share 30
T Ltd.
Profit after tax 3,60,000
Equity Share outstanding 1,80,000
EPS 2
Price/earning ratio 7
Market price per share 14
Required:
Problem (i) The number equity share issued by A ltd. for acquisition of T ltd.
Problem (ii) What is the EPS of A ltd after acquisition?
Problem (iii) Determine the equivalent EPS of T ltd.
Problem (iv) What is the expected market price per share of A ltd. after the acquisition, assuming p/e multiple remain unchanged.
Problem (v) Determine the market value of merged firm.