1. The document contains questions regarding mergers and acquisitions, valuation of companies, and cash flow analysis. 2. Specific questions ask about EPS and share value of companies pre- and post-merger, swap ratios in an acquisition, maximum price to pay for a target, and dividend growth models. 3. One question provides details on a company's financials and asks to calculate valuation using a discounted cash flow approach factoring in costs of capital, growth rates, and cash flow projections over multiple years.

1. Question
-1

2. Question -2
• X is intending to acquire B Ltd and the following information is available
• What is the present EPS
• If merger takes place what would be the value of share of X based on both share swap on
MV and & EPS basis.
Particulars X ltd Rs B Ltd Rs
No of shares 500,000 300,000
EPS (PAT) 2,500,000 900,000
MV of a share 21 14

3. Q-3
Company -A US $ Company –B
Present earnings 20,000,000 5,000,000
Share outstanding's 5,000,000 2,000,000
Earnings per share 4 2.50
Price per share 64 30
Price /earning ratio 16 12
Assume that company B agrees to sell to A for a share price of 35 in
amalgamation with Company A.
What is the swap ratio ?
What would be the value of company A after the merger ?
What would be the theoretical market price per share after the merger ?

4. Q-4
• X is considering to acquire Y ltd
• X intends to pay Rs 14.0 Mn in cash
• Is it worth X to pay Y ltd cash and what is the cost of merger
• If 500,000 shares are issued to Y what would be the cost of merger
Particulars X ltd Y ltd
No of ordinary shares 1,000,000 6,00,000
MV per share 30 18
Market capitalization 3,000,000 10,080,000

5. Q-5
Ignore tax

6. Q-5

7. Q-6

8. Question
7

9. Q -8
• 7.1 A company paid a dividend of $250,000 this year.
The current return to shareholders of companies in
the same industry is 12%, although it is expected
that an additional risk premium of 2% will be
applicable to the company, being a smaller and
unquoted company. Compute the expected valuation
of the company, if: (a) The current level of dividend is
expected to continue into the foreseeable future

10. Q 8.2
• The formula to be with a dividend growth
• P = D 91.g)/(k-g)
Where : D = Dividend per year
k = Cost of capital
G = Growth
Answer = P= (250,000*1.04)/(.14-.04)
=2.6Mn

11. Q-9 –Cash flow valuations
• A is considering to acquire B. Same line of business where the
latter has after cash flow of Rs 2.0 Mn per year.
• After merger 15% growth is expected for next 15 years and
company forecasts for 25 year period where the growth is
taken only up to 15 th year.
• To sustain cash flow annual investment is Rs 1.0 Mn required.
• If cost of capital is 18% ,what is the maximum that A should
pay to B.

12. Q-10
Illustration
No Description Value
1 2000 sales Past year 55.3Ml
2 2001 sales Present year 55Mn
3 Tax rate 24%
4 Cost of capital 10%
5 Growth rate in sales up to 2004 5%after 2%
6 Working capital/Sales 2000 44%after 40%
7 COGS is 2000 67%after 65%
8 SGA 2000 21%after 20%
9 Depreciations 2000 2.1Mn
10 Other deductions 0.2Mn
11 New investments assumed to equal
Depreciations
12 Vaue of debt 10Mn
13 No of shares 584000