Bell Ltd. is taking over Ring Ltd. shareholders of Ring Ltd. would get 0.8 shares in Bell Ltd. for every share held in Ring Ltd. Data in respect of both the companies is as given below: Bell Ltd. Ring Ltd. Net Sales (in

Premium available to shareholders of Ring Ltd as per market value of each share in Bell Ltd = 0.8 x 30 = 24 Value of each share in Ring Ltd before Merger = 20 Hence Premium = 4 Premium as a percentage = 4/20 x 100 = 20% Number of shares allotted to shareholders of Ring Ltd. = 3 x 0.8 = 2.4 Crores Number of shares in combined resultant company = 12 + 2.4 = 14.4 Crores Combined Profit after Tax = 58 + 12 = 70 Crores (i) Combined EPS (70/14.4) = 4.86 (ii) Combined P/E Ratio = 6.21 x (58/70) + 5 x (12/70) = 6 (iii) Market Value Per Share i. e., P/E Ratio x EPS or 6 x 4.86 = 29.16 (iv) Number of shares in the Resultant Company = 12 + 2.4 = 14.4 Crores (v) Total Capitalisation of Resultant Company = Market Value Per Share x Number of shares or 29.16 x 14.4 = 419.90 Crores