Company A is merging with Company B, determine a fair exchange ratio based on Net Asset Value (NAV) and Earnings per Share (EPS). Particulars Company A (Acquirer) Company B (Target) Equity Shares 10,00,000 5,00,000 Net A

Step 1: Calculation of exchange ratio on the basis Net Asset Value (NAV) per Share Company A: NAV A = 60,00,000/10,00,000 = 6 Company B: NAV B = 30,00,000/5,00,000 = 6 Exchange Ratio (NAV): 6/6 = 1 Step 2: Calculation of exchange ratio on the basis Earnings per Share Company A: EPS A = 10,00,000/10,00,000 = 1 Company B: EPS B = 4,00,000/5,00,000 = 0.80 Exchange Ratio (EPS): 0.80/1 = 0.80 Step 3: Calculation of fair exchange ratio: Fair exchange ratio = (1 + 0.80) / 2 = 0.90 (as no weights are given in the question therefore, equal weight is being given to both the methods in valuation).