T plc wants to acquire L plc. The balance sheet of L plc as on 31st March 2022 is as follows: Liabilities £ Assets £ Equity Capital (35,00,000…

T plc wants to acquire L plc. The balance sheet of L plc as on 31st March 2022 is as follows: Liabilities £ Assets £ Equity Capital (35,00,000 shares) 35,00,000 Cash 2,50,000 Retained earnings 15,00,000 Debtors 3,50,000 12% Debentures 15,00,000 Inventories 10,00,000 Creditors and other liabilities 16,00,000 Plants & Eqpt. 65,00,000 81,00,000 81,00,000 Additional Information: (i) Shareholders of L plc will get one share in T plc for every two shares. External liabilities are expected to be settled at £2.50 Million. Shares of T plc would be issued at its current price of £1.50 per share. Debenture holders will get 13% convertible debentures in the purchasing company for the same amount. Debtors and inventories are expected to realize £1 Million. (ii) T plc has decided to operate the business of L plc as a separate division. The division is likely to give cash flows (after tax) to the extent of £2.50 Million per year for 6 years. T plc has planned that, after 6 years, this division would be demerged and disposed of for £1 Million. (iii) The company's cost of capital is 16%. Advise the Board of the company about the financial feasibility of this acquisition. Net present values for 16% for £1 are as follows: Years 1 2 3 4 5 6 PV 0.862 0.743 0.641 0.552 0.476 0.410