Zen Limited is proposing to take over Ken Limited at an exchange ratio of 4: 5.Following information is available for the companies: Zen Limited Ken Limited Profit before Tax (in crore) 20 14 No. of shares (in crore) 30

Calculation of Profit after Tax (PAT): Zen Limited (cr) Ken Limited (cr) Profit before Tax (PBT) 20 14 Tax @ 30% 6 4.2 Profit after Tax (PAT) 14 9.8 (i) Market Value of both the companies: Zen Ltd. = PAT * P/E = 14 cr * 12 = ₹168 cr Ken Ltd. = PAT * P/E = 9.8 cr * 10 = ₹98 cr (ii) Value of original shareholders: Zen Limited Ken Limited Market value of shares (₹) (cr) 168 98 No. of shares (cr) 30 20 Price of share i.e. value of original shareholder 168/30 = ₹5.6 98/20 = ₹4.9 (iii) Price per share after merger: Exchange ratio of Zen Limited to Ken Limited is 4:5. This means for every 5 shares of Ken Limited, 4 shares of Zen Limited will be issued. Number of shares of Ken Limited after merger = 20 cr * (4/5) = 16 cr Total number of shares after merger = Shares of Zen Limited + Shares of Ken Limited (post-exchange) = 30 cr + 16 cr = 46 crores Combined PAT of entity = PAT of Zen Limited + PAT of Ken Limited = 14 cr + 9.8 cr = 23.8 cr Market value of combined entity = Combined PAT * P/E Ratio of Zen Limited (assuming Zen is the acquirer and its P/E ratio applies) = 23.8 cr * 12 = 285.6 cr Price per share (after merger) = Market value of combined entity / Total number of shares after merger = 285.6 cr / 46 cr = ₹6.2087