Eno $($Ltd$),$ an automotive manufacturing company is in the process of negotiating the acquisition of Hino

$($Ltd$).$ The management estimates that the acquisition will result in economies of scale and the additional

benefits will amount to R$18$ million.

The following information is available for the two companies:

Eno Hino

Earnings per share R$2\mathrm{.}00$ R$1\mathrm{.}60$

Dividend per share R$2\mathrm{.}00$ R$0\mathrm{.}90$

Growth rate $11\%5\%$

Market price per share R$25\mathrm{.}00$ R$12\mathrm{.}50$

No$.$ of shares issued $8$ million $5$ million

Required: $($round off to two decimal places, where applicable$)$

$1\mathrm{.}1$ Calculate the exchange ratio based on market values. $(2$ Marks$)$

$1\mathrm{.}2$ Calculate the exchange ratio based on earnings per share. $(2$ Marks$)$

$1\mathrm{.}3$ Calculate the post$-$acquisition earnings per share $($EPS$),$ based on $1\mathrm{.}2$ above. $(6$ Marks$)$

$1\mathrm{.}4$ Calculate the benefits, if any, to the companies. $(5$ Marks$)$

$1\mathrm{.}5$ Assume that Eno Ltd agree to a one$-$for$-$one exchange of shares, calculate the expected postacquisition earnings per share.

$(4$ Marks$)$

$1\mathrm{.}6$ Assuming a post$-$acquisition Price$/$Earnings Ratio $($P$/$E$)$ of $13,$ calculate the expected postacquisition market price and compare it to next year$$s expected price without the acquisition. Should the

acquisition take place? Justify your answer.

$(6$ Marks$)$