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Determine the market value of merged firm

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Reference no: EM132618596

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

Ttd.

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

Reference no: EM132618596

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