Earnings per share for all gold mining

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Consider the following pre-merger information about a bidding company (All Gold Mining) and a target company (Silver Enterpises) at the end of the year 2020: All Gold Mining had 600 000 ordinary shares outstanding and had earnings of R1 600 000. All Gold Mining's earnings are expected to grow at an annual rate of 5%. Silver Enterpises had 100 000 ordinary shares outstanding and had earnings of R200 000. Silver Enterpises' earnings are expected to grow at an annual rate of 10%.

1. Calculate the next 5 years' (2020-2024) earnings per share (EPS) for All Gold Mining before the merger.

2. Calculate the next 5 years' (2020-2024) earnings per share (EPS) for Silver Enterpises before the merger.

3. Calculate the next 5 years' (2020-2024) earnings per share (EPS) for Silver Enterpises post- merger at 1.1 exchange rate.

4. Should Silver Enterpises continue with the merger? Provide a reason for your answer.

Reference no: EM133239578

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