XYZ ltd. is considering the merger with ABC ltd. XYZ ltd. Share is currently trading at 25

rs. It has 2, 00,000 shares outstanding and earnings after tax amount to 4, 00,000 Rs. ABC ltd.

has 1, 00, 000 shares outstanding its current market price is 12.5 Rs. and PAT is 1, 00, 000 Rs.

The merger will be effected by means of stock swap. ABC ltd has agreed to plan under which

XYZ ltd. will offer the current market value of ABC ltd. shares:

(i). what is the premerger EPS and P/E of both companies

(ii). If ABC ltd.'s P/E ratio is 8 what is its current market price? What is the exchange ratio?

What will XYZ ltd. post merger be?

(iii). what must be the exchange ratio be for XYZ ltd. what pre and post merger EPS to be the

same.