User Account

All Pages

What exchange ratio mega limited shareholders negotiate

Assignment Help Financial Accounting
Reference no: EM132512757

Supa-Mega

Supa Limited, a large social networking firm, is considering acquiring Mega Limited, a relatively new app development firm.

Assume the following details for the current year are relevant:

Supa Limited Mega Limited Price-earnings ratio 10 12

Total earnings R21 600,000 R6 720,000

Number of shares in issue 9,000,000 4,200,000

Dividend per share R1.60 R0.96

  • Mega Limited's earnings and dividends are expected to grow by 18% over the next three years, after which the earnings and dividends are expected to grow at a sustainable growth rate of 8% per annum. Mega Limited's ordinary shareholders' required rate of return is 15%. The industry average price-earnings (PE) ratio is 9. Supa Limited estimates that the acquisition of Mega Limited will increase the earnings of the combined firm by R3.6 million.

Question 1.1 If Supa Limited is considering a cash offer, what minimum offer should they make for all of Mega Limited's issued shares, based on the:

1.1.1 what is the dividend growth model?

1.1.2 how to calculate price-earnings multiple (using current earnings)?

Question 1.2 If Supa Limited is considering a share exchange, what exchange ratio should Mega Limited shareholders negotiate for themselves in order to capture the total benefit of the merger?

Question 1.3 Given your answer in 1.2 above, show that the acquisition will not result in the dilution of Supa Limited shareholders' earnings per share.

Question 1.4 Briefly discuss any five (5) reasons that the management of Supa Limited could give to their shareholders to justify their interest in acquiring Mega Limited.

Reference no: EM132512757

Questions Cloud

Analyse financial statements using effective strategies : Critically evaluate the role and content of each of the four main financial statements as sources of quantitative data, and their impact on business decision
Webers molecular theory of magnetism : Using webers molecular theory of magnetism, describe the polarity of the magnetic poles produced by stroking a magnetic material
Prepare the appropriate general journal entry to recognise : Prepare the appropriate general journal entry to recognise the contribution of buildings to the joint operation by Toss Ltd and the proportional interest
Decision making and assumptions : An automobile manufacturer's assumption that the demand for SUVs would continue because gas prices would continue to rise.
What exchange ratio mega limited shareholders negotiate : Briefly discuss any five (5) reasons that the management of Supa Limited could give to their shareholders to justify their interest in acquiring Mega Limited.
Discuss the advantages of different settings : Discuss the advantages and disadvantages of two different settings that can be used to address the health behavior in the targeted population.
Difference between the domain theory and webers : What is the difference between the domain theory and webers theory of magnetism?
Explain the benefits of assimilating into another culture : America is often referred to as "the melting pot," a metaphor for assimilation. Define assimilation and explain the benefits and challenges of assimilating.
Determine deposit in transit and checks outstanding : Determine deposit in transit and checks outstanding. RAM company maintains its checking account. Prepare the December 31 Bank reconcilliation

Reviews

Write a Review

Financial Accounting Questions & Answers

  Financial statement analysis and preparation

Financial Statement Analysis and Preparation

  Shareholder of a company

Describe the ways that a person can become a shareholder of a company. Why Wal-Mart would split its stock?

  Financial and accounting principles

An understanding of financial and accounting principles can be a valuable tool for managers. While not all managers will find themselves calculating financial ratios or preparing annual financial data.

  Prepare a statement of cash flow using the direct method

Prepare a Statement of Cash Flow using the Direct Method and Prepare the Operations section of the Statement of Cash Flow using the Indirect Method.

  Financial accounting assignment

This assignment has one case study and two question apart from case study. Questions related to document Liquidation question and Company financial statements question - Torquay Limited

  Prepare general journal entries for goela

Prepare general journal entries for Goela Ltd

  Principles of financial accounting

Prepare the journal entry to record the acquisition of the assets.

  Prepare general journal entries to record the transactions

Prepare general journal entries to record the transactions, assuming use of the periodic inventory system

  Global reporting initiative

Compare the view espoused by the economist Milton Friedman about the social responsibilities of business with the views express by Stigler.

  Explain the iasb conceptual frameworks

Explain the IASB Conceptual Framework's perspective of users and their decisions.

  Determine the company''s financial statements

T he focus of the report is to determine the extent to which you are comfortable relying on the financial statements as presented by management .

  Computation of free cash flow

Computation of Free Cash Flow

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd