BLUERAIL LTD, a large social networking firm, is considering acquiring BLUE LOG LTD, a relatively new app development firm.

Assume the following details for the current year are relevant:

BLUERAIL BLUE LOG

Price-earnings ratio 10 12

Total earnings R21 600 000 R6 720 000

Number of shares in issue 9 000 000 4 200 000

Dividend per share R1.60 R0.96

BLUELOG earnings and dividends are expected to grow by 18% over the next three years, after which the earnings and dividends are expected to grow at a sustainable growth rate of 8% per annum.

BLUE LOG ordinary shareholders required rate of return is 15%.

The industry average price-earnings (PE) ratio is 9.

BLUERAIL estimates that the acquisition of BLUELOGwill increase the earnings of the combined firm by R3.6 million.

BLUERAIL CONSIDER CASH OFFER WHAT IS THE MINIMUM OFFER THEY MUST MAKE FOR ALL BLUELOG ISSEUD SHARES BASED ON DIVIDEND GROWTH MODEL AND PRICE EARNING MULTIPLE(USE CURRENT EARNINGS)