Question
Question No. 10 Mohanan Swamy Manufacturing Ltd., Chennai, has earnings per share (EPS) of Rs.3.00, 5 million shares outstanding, and a share price of Rs.32.
Question No. 10\ Mohanan Swamy Manufacturing Ltd., Chennai, has earnings per share (EPS) of Rs.3.00, 5 million shares outstanding, and a share price of Rs.32. Mohanan Swamy Manufacturing is considering buying Lala Ram Industries Ltd., Hissar, which has earnings per share of Rs.2.50, 2 million shares outstanding, and a share price of Rs.20. Mohanan Swamy Manufacturing will pay for Lala Ram Industries by issuing new shares valued at the current market price. There are no expected synergies from the transaction.\ Required\ Mohanan Swamy Manufacturing pays no premium to acquire Lala Ram Industries. Calculate Mohanan Swamy Manufacturing's price-earnings (P/E) ratio both pre- and post- merger. What managerial inferences do you draw from these calculations?\ (4 marks, CO: 3)\ Answer\ Reasons/Calculations:
Question No. 10\ Mohanan Swamy Manufacturing Ltd., Chennai, has earnings per share (EPS) of Rs.3.00, 5 million shares outstanding, and a share price of Rs.32. Mohanan Swamy Manufacturing is considering buying Lala Ram Industries Ltd., Hissar, which has earnings per share of Rs.2.50, 2 million shares outstanding, and a share price of Rs.20. Mohanan Swamy Manufacturing will pay for Lala Ram Industries by issuing new shares valued at the current market price. There are no expected synergies from the transaction.\ Required\ Mohanan Swamy Manufacturing pays no premium to acquire Lala Ram Industries. Calculate Mohanan Swamy Manufacturing's price-earnings (P/E) ratio both pre- and post- merger. What managerial inferences do you draw from these calculations?\ (4 marks, CO: 3)\ Answer\ Reasons/Calculations:
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Chains Of Finance How Investment Management Is Shaped
Authors: Diane-Laure Arjalies, Philip Grant, Iain Hardie, Donald MacKenzie, Ekaterina Svetlova
1st Edition
0198802943, 978-0198802945
