A Ltd. and B Ltd. operate in the same industry. Following are their financial statements for the financial year ended 31st March, 2015: Balance sheets Particulars A Ltd. (₹) B Ltd. (₹) Total current assets 14,00,000 10,0

A Ltd. and B Ltd. operate in the same industry. Following are their financial statements for the financial year ended 31st March, 2015: Balance sheets Particulars A Ltd. (₹) B Ltd. (₹) Total current assets 14,00,000 10,00,000 Total fixed assets (net) 10,00,000 5,00,000 TOTAL ASSETS 24,00,000 15,00,000 Equity capital (₹10 each) 10,00,000 8,00,000 Retained earnings 2,00,000 14% Long-term debts 5,00,000 3,00,000 Total current liabilities 7,00,000 4,00,000 TOTAL LIABILITIES 24,00,000 15,00,000 Income statements Particulars A Ltd. (₹) B Ltd. (₹) Net sales 34,50,000 17,00,000 Less: Cost of goods sold 27,60,000 13,60,000 Gross profit 6,90,000 3,40,000 Less: Operating expenses 2,96,923 1,45,692 Interest 70,000 42,000 Earnings before tax (EBT) 3,23,077 1,52,308 Less: Tax (35%) 1,13,077 53,308 Earnings after tax (EAT) 2,10,000 99,000 Additional information Particulars A Ltd. B Ltd. Number of equity shares 1,00,000 80,000 Dividend payment (D/P) ratio 0.40 0.60 Market price per share (MPS) ₹40 ₹15 Assume that the two companies are in the process of negotiation for merger through exchange of equity shares. You have been asked by management of both the companies to assist in establishing equitable exchange terms. You are required to: Decompose the share prices of both the companies into earnings per share (EPS) and price earnings (P/E) components and also segregate their EPS figures into return on equity (ROE) and book value or intrinsic value per share components.