Question five

Byte Plc seeks to grow by acquisition and is investigating possible targets. The following data has been collected by the firm's treasury department. Number of shares Byte Plc 30 million GH.9 40 Current Share price loTech Limited 10 million GH&3.60 Byte Plc's treasury department's initial valuation estimates indicate that the combined entity will be worth GHC 350 million

REQUIRED

A. What is the net cost of the acquisition if Byte Plc pays GHeS.10 in cash for each share of loTech Limited? At this cost, is it viable to proceed with the acquisition? What is the price per share of the new entity? [10 marks]

B. What is the net cost of the acquisition if Byte Plec issues one of its own shares for every two shares of loTech Limited? At this cost, is it viable to proceed with the acquisition? What is the price per share of the new entity? [10 marks)