In respect of the acquisition by ABC Ltd. (another subsidiary of MAPL) of XYZ Ltd., you are required to calculate: (i) The number of equity shares…

(i) The number of shares to be issued by ABC Ltd.: The Exchange ratio is 0.5. So, new Shares = 1,80,000 x 0.5 = 90,000 shares. (ii) EPS of ABC Ltd. after acquisition: Total Earnings (₹ 18,00,000 +3,60,000) = 21,60,000 No. of Shares (6,00,000 + 90,000) = 6,90,000 EPS (21,60,000/6,90,000) = 3.13 (iii) Equivalent EPS of XYZ Ltd.: No. of New Shares = 0.5 EPS = 3.13 Equivalent EPS (3.13 x 0.5) = 1.57 or - 1.56 (iv) New Market Price of ABC Ltd. (P/E remaining unchanged): Present P/E Ratio of ABC Ltd. = 10 times Expected EPS after merger = 3.13 Expected Market Price (₹ 3.13 x 10) = 31.30 (v) Market Value of merged firm: Total number of Shares = 6,90,000 Expected Market Price = 31.30 Total value (6,90,000 x 31.30) = 2,15,97,000 Or PAT after acquisition (₹ 18,00,000 +3,60,000) = 21,60,000 PE Ratio = 10 Market Value of Merged Firm (₹ 21,60,000 x 10) = 2,16,00,000