Long Ltd., is planning to acquire Tall Ltd., with the following data available for both the companies: Long Ltd. Tall Ltd. Expected EPS 12 5…
CA Final · Advanced Financial Management · RTP · May 2026
Long Ltd., is planning to acquire Tall Ltd., with the following data available for both the companies: Long Ltd. Tall Ltd. Expected EPS 12 5 Expected DPS 10 3 No. of Shares 30,00,000 18,00,000 Current Market Price of Share 180 50 As per an estimate Tall Ltd., is expected to have steady growth of earnings and dividends to the tune of 6% per annum. However, under the new management the growth rate is likely to be enhanced to 8% per annum without additional investment. You are required to: (i) Calculate the net cost of acquisition by Long Ltd., if 60is paid for each share of Tall Ltd.
Suggested Answer and Working Notes:
Net cost of acquisition shall be computed as follows: Cash Paid for the shares of Tall Ltd. (₹ 60 × 18,00,000) 10,80,00,000 Less: Value of Tall Ltd., as a separate entity (18,00,000 × ₹ 50) 9,00,00,000 Net Cost of acquisition of Tall Ltd. 1,80,00,000
Topics: Mergers, Acquisitions and Corporate Restructuring
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