3)

	Mega Ltd	Mart Ltd
Total Earnings	$8.7 mil	$2.9 mil
Number of shares outstanding	750,000	500,000
EPS	$11.60	$5.80
P/E Ratio	6X	12X
Market Price per share	$69.60	$69.60

Mega Ltd is planning to merge with Mart Ltd. Under the merger one share in Mega Ltd will be exchanged for every 1.25 shares in Mart Ltd. The new firm will be called Mega Mart Ltd. As a result of the merger a reduction in costs in the amount of $1 mil is projected along with synergistic benefits of $2 mil resulting from the increased distribution network and market share. As a result of these improvements the P/E of the new firm is projected to be 15X.

Required: Calculate the expected market value of the merged firm and advise Mega Ltd. whether they should go ahead with the merger, giving the reason for your recommendation.

Please help fast!