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The following data are pertinent for companies A and B. A B Present Earnings Shs 20 million Shs 4 million No of shares 10 million 1 million Price/ earning ratio 18 10 a. If the two companies were to merge and the exchange ratio were one share of Company A for each share of Company B, what would be the initial impact on earnings per share of the two companies? what is the market value exchange ratio? Is the merger likely to take place? b. If the exchange ratio were two shares of Company A for each share of Company B what would happen with respect to the above? C. If the exchange ratio were 1.5 shares of Company A for each share of Company B, what would happen? d. What exchange ratio would you recommend?Max Lid. Mini Lid. Annual sales (millions) Shs 750 Shs 90 Net income (millions) Shs 60 Shs 7.50 Ordinary shares outstanding (millions) 15 3 Earnings per share (EPS) Shs 4 Shs 2.50 Market price per share Shs 44 Shs 20 Both companies are in the 40% income tax bracket. REQUIRED: i. Calculate the maximum exchange ratio Max Led. should agree to if it expects no dilution in EPS. (6 marks) ii. How much premium would the shareholders of Mini Lid. receive on a price of Shs 24.20. (4 marks) b. Calculate Maxi Lid's post merger EPS if the two companies settled on a price of Shs 24.20. (4 marks) Calculate Max Ltd's EPS if Mini Led. shareholders accept one Shs 6 convertible preference share (stated value Shs 100) for every 5 ordinary shares they own. (4 marks) d. Calculate Maxi Lid's EPS if every 50 shares of Mini Led. are exchanged for one 8% debenture of par value Shis 1,000. (4 marks) What one fundamental assumption have you made in your calculations in b., c. and d. above? (2 marks)A businessman wishes to borrow an amount of (10,000 for a term of 5 years. The agreed rate of interest is 8% per annum effective for the first 3 years, and 6% per annum effective thereafter. Repayments on the loan are made annually in arrears. (i) Find the amount of the level annual repayment. [2] (ii) Draw up the loan schedule for the full five-year period. [3] Calculate what percentage of the loan has been repaid by the end of the third year. [1] (iv) Without doing any further calculations, explain how this percentage figure would alter if the rate of interest had instead been 6% for the first three years and 8% thereafter. [2] [Total 8]