Mr Saman Fernando is the chief executive of Odel Ltd, a CSE listed co. The firm aims to be the market leader in next 4 years and wish to make an offer to acquire Fashion Plc an older quoted entity of similar size to Odel Ltd but with a profit record that has been erratic in recent years.

Mr Saman Fernando is of the opinion that Fashion Plc lacks marketing strength and feels that he could make the entity much more profitable. The offer is six Odel Ltd shares for eleven Fashion shares.

A summary of the financial date before the bid is as follows,

Number of shares in issue oDEL 40m fashion 44m

Earnings to ordinary shareholders (Rs)Odel 4m fashion 4.4 m

Price earnings RatioOdel 20 fashion 10

You are required to;

Q01 Part B (i) (14 Marks)

Demonstrate how Mr. Saman Fernando would calculate the below post-acquisition values.

- Estimated Market Capitalization after the acquisition

- Estimated share price after the acquisition

- Estimated Earnings per share after the acquisition

Q01 - Part B-(ii)(06 Marks)

if Fashion Ltd's shareholders rejects the bid, calculate the maximum price Odel Ltd could afford to pay without reducing its shareholders' wealth.