SOLVED NUMERICAL PROBLEMS
  1. Company A with 10 lakh outstanding shares of Rs 40 each acquires Company B which has 5 lakh outstanding shares of Rs 20 each. The latter will be ready for acquisition only when it gains at least Rs 25 lakh from this move. Find how much Company A should pay per share to Company B.

    Solution

    Payment per share = (Share value of target company + gain)/No. of shares

                                  = (5,00,000 shares × Rs 20 + Rs 25,00,000)/5,00,000 shares

                                  = Rs 25 per share

     

  2. Company A with 10 lakh outstanding shares of Rs 40 each acquires Company B which has 5 lakh outstanding shares of Rs 20 each. Their P/E ratio is 10 and 8 respectively. Find the price-earning ratio of the merged firm if Company ...

Get Fundamentals of Financial Management, Third Edition now with the O’Reilly learning platform.

O’Reilly members experience books, live events, courses curated by job role, and more from O’Reilly and nearly 200 top publishers.

Start your free trial