Links Ltd, a logistics company, is considering buying a smaller competitor in the same industry. The competitor, Smartmove Ltd, has a current share price of R10. Links Ltd.'s shares trade at R50. Determine the exchange ratio based on market values and discuss whether a counteroffer based on an exchange ratio of 0.25 would be acceptable for Links Ltd. Question 1.2 (6 Marks) Arcane Investments Ltd., a diversified educational service provider, proposed an acquisition offer of Tomes Ltd., an academic book retailer. Arcane Investments Ltd. offers an exchange ratio of 0.40 with its share price currently trading at R5. 20 and the target company, Tomes Ltd., trading at R1.50. Tomes Ltd. 's board recommended that its shareholders only accept an offer with a market premium over 10% as it considers its current share price to be undervalued. Determine the market premium and discuss the type of takeover Arcane Investments Ltd. is proposing. Argue whether Tomes Ltd. should accept the offer based on your calculations. Question 1.3 (6 Marks) A co-worker advocates for the company you work at to strictly adhere to the pecking order theory when raising capital. You, on the other hand, are in favour of loosely adhering to the trade-off theory while taking advantage of favourable market conditions from time to time. Write a brief report arguing your case to the CFO of the company