1. Pinder Ltd is considering a merger with Value Co, where Pinder Ltd will issue 2 of its own shares for 5 shares of Value Co. The share price for Pinder Ltd is $34.02 and the share price for Value Co is $10.89. The price-to-earnings ratio for Pinder Ltd is 10.68 and the price-to-earnings ratio for Value Co is 4.88. The number of shares outstanding for Pinder Ltd is 456,115 and the number of shares outstanding for Value Co is 219,806. There are no operational synergies expected from the merger, but Pinder Ltd believes that the Value Co was undervalued by the market due the lack of investor relations management, and that once it is included as part of Pinder Ltd, that Value Cos business would be valued 50% higher in terms of price or the price-to-earnings ratios. Based only on the information above, what is the expected price-to-earnings ratio of the combined firm if Pinder Ltds beliefs are correct? (round to the nearest two decimal places)

11.06

11.35

10.34

None of the other answers.

9.83

2. Pinder Ltd is considering building a solar power plant. The solar power plant will cost $10.1 million immediately, and will take 1 year to build. If there is high demand for electricity, the solar power plant will generate $5.2 million per year in perpetuity. If there is low demand for electricity, the solar power plant will generate $0.15 million per year in perpetuity. The probability of high demand is 68% and the probability of low demand is 32%. In order to incentivize solar power, the government is providing an offer for firms to sell their solar power plants to the government at a 10% discount to cost, exactly two years after the completion of the solar power plant. In other words, if the cost of building the solar power plant is $1, the government will offer to buy it at $0.9. There are no other options to sell the solar power plant other than to the government. The required rate of return for Pinder Ltd is 10%. Assume cash flows occur at the end of each year, except for initial cash flows. Based only on the information above, what is the value of the option to sell the solar power plant to the government, using the decision-tree method? (round to the nearest two decimal places)

$2.28 million

$1.82 million

$2.03 million

None of the other answers.

$2.45 million