Case Study IC (23 marks) Xola Ltd is considering the acquisition of Hate Ltd. Xola's price-earnings ratio is 12 and it has 6m ordinary shares in issue-it's after tax earnings amount to R16m per annum. Hate Ltd has a price. earnings ratio of 8 and has an issued ordinary share capital of 2million shares. Hate's after-tax earnings amount to R3m per annum. Earnings and dividends of Hate Ltd are expected to grow at a constant rate of 10% per aninum, without merger. The merger is expected to increase the growth rate in Hate's Ltd earnings and dividends to 12% per annum. Hate has a current dividend cover of three. Xola Ltd's tax rate is 28\%. The merger will result in an immediate increase, due to synergy, in after-tax earnings of p2.5m per annum. Xola Ltd's shareholders, based on the level of risk involved in Hate, require a return of 15% per annum from any investment in Hate Ltd. Case Study IC (23 marks) Xola Ltd is considering the acquisition of Hate Ltd. Xola's price-earnings ratio is 12 and it has 6m ordinary shares in issue-it's after tax earnings amount to R16m per annum. Hate Ltd has a price. earnings ratio of 8 and has an issued ordinary share capital of 2million shares. Hate's after-tax earnings amount to R3m per annum. Earnings and dividends of Hate Ltd are expected to grow at a constant rate of 10% per aninum, without merger. The merger is expected to increase the growth rate in Hate's Ltd earnings and dividends to 12% per annum. Hate has a current dividend cover of three. Xola Ltd's tax rate is 28\%. The merger will result in an immediate increase, due to synergy, in after-tax earnings of p2.5m per annum. Xola Ltd's shareholders, based on the level of risk involved in Hate, require a return of 15% per annum from any investment in Hate Ltd