QUESTION NO. 15 R Ltd and slid are companies that operate in the same industry. The financial statements of the companies for the current financial year are as follows Balance Sheet Particulars R. Ltd. () S. Ltd. () Equity & Liabilities Shareholders Fund Equity Capital ( 10 each) 20,00.000 16,00,000 Retained earnings 4,00,000 Non-current Liabilities 16% Long term Debt 10,00.000 6,00,000 Current Liabilities 14.00,000 8,00.000 Total 48,00.000 30,00.000 incurrent Assets Curent Act 20,00.000 10.000.000 2800.000 20.00.000 4800,000 30,00,000 Total Income Statement Net Sales Cost of Goods sold Go Profit (A+B) . Dj Operating Expenses interest Earnings before taxes IC-(DE) Tres a 35% 1) Famnings After Tax (EAT R. LA SIM (3) 69.00,000 34,00.000 55.20,000 27,20,000 13,80,000| 6,80,00 4,00,000 2,00,000 1.60,000 96,000 8.20.000 3.84.000 2.87.000 134.400 5,33.000 249,600 LH ) Additional Information: Particulars Na of equity shares Dividend payment Ratio (D/P) Market price per share R. LAS 2.00.000 20% 750 20 Asume that both companies are in the process of negotiating a merger through exchange of Equity You are required to Decompose the share price of both the companies into EPS&P/E components Ale segregate their EPS figures into Return on Equity (ROE and Book Value/Intrinsic Value per share components Estimate future EPS growth rates for both the companies estimated that the intrinse value of Slid. Equity Rased on expected operating synergies, RL w e would be 25 per Share on its acquisition You are required to develop a range of d to the shareholders of antifiable Equity Share Exchange ratios that can be offered by R Based on your analysis on parts (1) and (1), would you expect the negotiated terms to be to the upper or the lower exchange ratio limits and why