QUESTION 1 (25 Marks) The directors of Aba (Ltd), a hotel and leisure group operating along the coastal seaboard of South Africa have appointed you as a merger and acquisition specialist. They are considering the acquisition of Oca (Ltd). You are to advise them whether or not to proceed with the project. The following information is available: Aba (Ltd) Oca (Ltd) Market price per share R10.00 R8.00 Earnings per share R3.00 R2.40 No. of shares issued 2 million 1 million Cash payment to Oca Ltd = R12 million. Synergy benefits of R10 million will accrue through the acquisition. Required: Assume the acquisition is based on market values with a cash payment: 1.1 Calculate the combined value of the proposed acquisition. (2 marks) 1.2 Determine the net present value of the proposal. (2 marks) 1.3 Calculate the acquisition premium. (2 marks) 1.4 Calculate the post-acquisition market price of the share. (3 marks) 1.5 Determine the post-acquisition increase/decrease price of the share. (2 marks) Assume the acquisition is based on earnings per share: 1.6 Determine the exchange ratio based on earnings per share. (2 marks) 1.7 Compute the total number of shares in the proposed acquisition. (3 marks) 1.8 Calculate the post-acquisition earnings per share. (4 marks) 1.9 Calculate the benefits, if any, to the two parties. (5 marks)