To find the post-merger P/E ratio for ABC Ltd after acquiring XYZ Ltd, we need to calculate the combined earnings and shares after the acquisition, and then find the new P/E ratio. Let's break down the steps: Calculate the total earnings after the acquisition: ABC Ltd's earnings = R957 million XYZ Ltd's earnings = R397 million Total earnings after acquisition = Earnings of ABC + Earnings of XYZ Total earnings after acquisition = R957m + R397m Total earnings after acquisition = R1354 million Calculate the total shares outstanding after the acquisition: ABC Ltd's shares outstanding = B million shares (given as Bm) XYZ Ltd's shares outstanding = 64 million shares Total shares outstanding after acquisition = Shares of ABC + Shares of XYZ Total shares outstanding after acquisition = B million + 64 million Total shares outstanding after acquisition = (B + 64) million shares Calculate the combined P/E ratio before the acquisition: First, calculate the weighted average P/E ratio before the acquisition: Weighted average P/E ratio = ABC's earnings ABC's P/E ratio + XYZ's earnings XYZ's P/E ratio ABC's earnings + XYZ's earnings Weighted average P/E ratio= ABC's earnings+XYZ's earnings ABC's earningsABC's P/E ratio+XYZ's earningsXYZ's P/E ratio Weighted average P/E ratio = ( 957 15 ) + ( 397 9 ) 957 + 397 Weighted average P/E ratio= 957+397 (95715)+(3979) Weighted average P/E ratio = 14355 + 3573 1354 Weighted average P/E ratio= 1354 14355+3573 Weighted average P/E ratio = 17928 1354 Weighted average P/E ratio= 1354 17928 Weighted average P/E ratio 13.24 Weighted average P/E ratio13.24 Calculate the exchange ratio-adjusted P/E ratio: ABC is offering a 27% premium and the exchange ratio is 0.65. Premium-adjusted exchange ratio = 1 + Premium Premium-adjusted exchange ratio = 1 + 0.27 Premium-adjusted exchange ratio = 1.27 Exchange ratio-adjusted P/E ratio: Exchange ratio-adjusted P/E ratio = Weighted average P/E ratio Premium-adjusted exchange ratio Exchange ratio-adjusted P/E ratio=Weighted average P/E ratioPremium-adjusted exchange ratio Exchange ratio-adjusted P/E ratio = 13.24 1.27 Exchange ratio-adjusted P/E ratio=13.241.27 Exchange ratio-adjusted P/E ratio 16.85 Exchange ratio-adjusted P/E ratio16.85