Olive Ltd. is studying the possible acquisition of Cherry Ltd. by way of merger. The following data are available : Particular Olive Ltd Cherry Ltd Profit Before Tax 25,00,000 7,50,000 Number of Equity Shares 4,00,000 1,

CS Professional · Corporate Restructuring, Valuation and Insolvency · PYQS · June 2021
Olive Ltd. is studying the possible acquisition of Cherry Ltd. by way of merger. The following data are available : Particular Olive Ltd Cherry Ltd Profit Before Tax 25,00,000 7,50,000 Number of Equity Shares 4,00,000 1,00,000 PE Ratio 15 10 Corporate Tax Rate is 20% You are required to : Calculate EPS and Market Price per Share of both the companies before merger.

Answer & Explanation:

EPS and Market Price Per Share: Particulars Olive Ltd. Cherry Ltd. Profit Before Tax (a) 25,00,000 7,50,000 Profit After Tax (b) = (a) × 80% 20,00,000 6,00,000 Number of Equity Shares 4,00,000 1,00,000 EPS (b/Number of Equity Shares) 5 6 PE Ratio 15 10 MPS = EPS X PE Ratio 75 60

Topics: Mergers and Acquisitions

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