1 2 3 4 Target Company Ltd has agreed to be taken over by Purchasing Company Ltd via a share exchange whereby Target shareholders will each receive one share of Purchasing for every two they hold. No synergistic gains in earnings are expected to arise from the takeover. Given the following pre-takeover details of the two companies and assuming the market assigns a price earnings ratio of 19 to the post-takeover company, how will the wealth of shareholders of Target and Purchasing have changed after the takeover? Share price P/E ratio Shares authorised Shares issued Purchasing CU3.00 20 10 million 5 million (1) (2) (3) (4) Alpha Ltd is to acquire the entire share capital of Beta Ltd. The consideration is one new Alpha share for every two Beta shares. The combined group will save CU8,000 per annum on administration costs. Extracts from the pre-merger budgets of both companies are as follows: Alpha CU'000 200 Cost of setting up an equivalent venture Economic value of the business Profit after tax Share capital CUI shares. 50p shares What is the new budgeted earnings per share of the enlarged Alpha Ltd? Pointon Ltd has made an offer of one of its shares for every two of Sidbury Ltd. Synergistic benefits from the merger would result in increased after-tax earnings of CU4m per annum. Extracts from the latest accounts of both companies are as follows: Profit after tax Number of shares. Market price of shares Assume that the price of Pointon Ltd's shares rises by 20p after the merger. What will be the price-earnings ratio of the group? An independent accountant has produced the following valuations of a private company: 400 Pointon Ltd CU100m Historical cost adjusted for changes in general purchasing power Piecemeal net realisable value Target CU1.50 10 400 million 250p 2.5 million 1 million. Beta CU'000 40 200 Sidbury Ltd CU20m 100 million 100p CUM 3.2 4.1 5.3 5.6 Assume that the above valuations accord with the expectations and risk perceptions of the purchaser. What is the maximum price that he should pay for the private company?

1 Target Company Lid has agreed to be taken over by Purchasing Company Ltd via a share exchange whereby Target shareholders will each receive one share of Purchasing for every two they hold. No synergistic gains in earnings are expected to arise from the takeover. Given the following pre-takeover details of the two companies and assuming the market assigns a price earnings ratio of 19 to the post-takeover company, how will the wealth of shareholders of Target and Purchasing have changed after the takeover? 2 Alpha Ld is to acquire the entire share capital of Beta Ld. The consideration is one new Alpha share for every two Beta shares. The combined group will save CU8,000 per annum on administration costs. Extracts from the pre-merger budgets of both companies are as follows: What is the new budgeted earnings per share of the enlarged Alpha Lid? 3 Pointon Lid has made an offer of one of its shares for every two of Sidbury Ld. Synergistic benefits from the merger would result in increased after-tax earnings of CU4m per annum. Extracts from the latest accounts of both companies are as follows