Q.No.1. You are hired by a financial consultant firm and you were sent to evaluate the mergers of Abeer Ltd and Baber Ltd. Below data was available to you about Abeer Ltd and Baber Ltd. Particulars Present earnings (in millions) Number of shares (in millions) Price/earnings ratio Abeer Ltd Rs. 200 Rs. 100 18 Baber Ltd Rs. 40 Rs. 10 10 a. If the two companies were to merge and the share exchange ratio were 1 share of Abeer Ltd for each share of Baber Ltd, what would be the initial impact on earnings per share of the two companies? What is the market value exchange ratio? Is a merger likely to take place? b. If the share exchange ratio were 2 shares of Abeer Ltd for each share of Baber Ltd, what would happen with respect to Part (a)? c. If the exchange ratio were 1.5 shares of Abeer Ltd for each share of Baber Ltd, what would happen? d. What exchange ratio would you suggest?