Ruchi Industries Ltd. is planning to acquire Jyoti Industries Ltd. through merger. Based on the available information calculate: Exchange Ratio for the shareholders of Jyoti Industries Ltd. at the EPS of pre merger level

3. Exchange Ratio for the shareholders of Jyoti Industries Ltd. at the EPS of pre merger level of Ruchi Industries Ltd. EPS of members of Jyoti Industries post merger should be ₹5 Number of Shares to be issued to = (₹3 / ₹5) * 6,00,000 = 3,60,000 Members of Jyoti Industries = 3,60,000 Total Earnings of the merged company = ₹68,00,000 Total Number of Equity shares of the merged company to maintain the premerger EPS = 10,00,000 + 3,60,000 = 13,60,000 EPS after merger = ₹5 Exchange Ratio if EPS is to be maintained at pre merger level of Ruchi Industries Ltd. No. of existing Shares: 6,00,000 Number of shares which will be issued: 3,60,000 Exchange ratio: 3,60,000 / 6,00,000 = 3/5 i.e for 5 shares in Jyoti Industries Ltd. member will get: 3 shares of Ruchi Industries Ltd.