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,

Revised EPS of Merged Entity Step 1: Calculate Exchange Ratio based on Market Prices Market Price per Share (MPS) of Olive Ltd. = ₹75 Market Price per Share (MPS) of Cherry Ltd. = ₹60 Exchange Ratio = MPS of Cherry Ltd. / MPS of Olive Ltd. = ₹60 / ₹75 = 0.80 This means 0.80 shares of Olive Ltd. for every 1 share of Cherry Ltd., or 4 shares of Olive Ltd. for every 5 shares of Cherry Ltd. Step 2: Calculate Number of shares to be issued to shareholders of Cherry Ltd. Number of Equity Shares of Cherry Ltd. = 1,00,000 Shares to be issued = 1,00,000 × 0.80 = 80,000 shares Step 3: Calculate Total Profit After Tax (PAT) of Merged Entity PAT of Olive Ltd. = ₹20,00,000 PAT of Cherry Ltd. = ₹6,00,000 Total PAT = ₹20,00,000 + ₹6,00,000 = ₹26,00,000 Step 4: Calculate Total Number of Shares of Merged Entity Existing shares of Olive Ltd. = 4,00,000 New shares issued to Cherry Ltd. shareholders = 80,000 Total shares = 4,00,000 + 80,000 = 4,80,000 shares Step 5: Calculate Revised EPS of Merged Entity Revised EPS = Total PAT / Total Shares = ₹26,00,000 / 4,80,000 = ₹5.42 The new earnings per share for Olive Ltd. after merger will be ₹5.42.