Golden Goose Ltd is considering the acquisition of woodpecker Ltd. Golden Goose's Price earning ratio is 16 and it has 8 million issued ordinary shares. the after-tax earnings amounts to 8 million per annum. woodpecker Ltd has a price -earning ratio of 12 and has an issued ordinary share capital of 2 million shares. woodpecker's after-tax earning amount to 6 million per annum.

Earning and dividends of woodpecker Ltd are expected to grow at a constant rate of 10% per annum, without the merge. The merger is expected to increase the growth rate in woodpecker Ltd's earning and dividends to 12% per annum. Woodpecker Ltd has a current dividend cover of two. Golden Goose Ltd's tax rate is 28%. The merger will result in an immediate increase, due to synergy, in after-tax earnings of 1million per annum. Golden Goose Ltd's shareholders, based on the level risk of risk involved in woodpecker Ltd, require a return of 16% per annum from any investment in woodpecker Ltd

Required

1. What value would Golden Goose Ltd place on each share in woodpecker Ltd ? (5)
2. What is the effect on the earnings per share of Golden goose and woodpecker Ltd's shareholders if Golden Goose Ltd offered 6 million of its share in exchange foe shares in woodpecker Ltd ? ( 9)
3. Golden Goose is considering a cash offer of 45 per share in woodpecker Ltd . This cash offer will be financed by a loan at an interest rate of 14% per annum. Calculate the impact this would have on the EPS. (6)