Q - 8: During the 1990s, the acquisition strategy was possible for firm located in countries where high P/E ratios were common compared to firms in other countries where low P/E ratios were common. Consider the following information available relating to Sohar Company and Nizwa Co.: Market P/E No. of Value Total Market Company Ratio Shares Per Share Earnings EPS Value Sohar Company 20 10,000,000 $ 20.00 $ 10,000,000 1.00 $ 200,000,000 Nizwa Co. 40 10,000,000 $40.00 10,000,000 1.00 $ 200,000,000 Nizwa Co. wants to acquire Sohar Company. It offers 5,500,000 shares of Nizwa Co., with a current market value of 220,000,000 and a 10% premium on ModoUnico's shares, for all of Sohar Company's shares. (a) How many shares would Nizwa Co. have outstanding after the acquisition of Sohar Company? (1 mark) (b) What would be the consolidated earnings of the combined Nizwa Co, and Sohar Company? (1.5 mark) (c) Assuming the market continues to capitalize Nizwa Co.'s earnings at a P/E ratio of 40, what would be the new market value of Nizwa Co.? (1.5 mark) (d) What is the new earnings per share of Nizwa Co.? (1 mark) (e) What is the new market value of a share of Nizwa Co.? (1 mark) (f) How much did Nizwa Co.'s stock price increase? (1 mark) (g) Calculate percentage increase in Nizwa Co.'s stock price? (1 mark)