This question came in May 2009 ( rather June 2009) exam of Strategic Financial Management. Question no - 5.
I am writing down the problem here in a nutshell.
Problem :
Takeover - Abhiman Ltd taking over Abhishek Ltd
Abhimaan Ltd :
Share Cap - 200 lacs
Free Res & Surplus - 800 lacs
Paid up value /share - 100
Free float market capitalisation - 400 lacs
P.E ratio - 10 times
Abhishek Ltd :
Share Cap - 100 lacs
Free Res & Surplus - 500 lacs
Paid up value /share - 10
Free float market capitalisation - 128 lacs
P.E ratio - 4 times
For swap ratio weights are assigned to different parameters by the Board :
Book Value - 25%
EPS - 50%
Market Price -25%
q 1 ) What is the swap ratio ?
q 2) Calculate Free foat market capitalisation
q 3) Calculate B.value , EPS , MP after acquisition (assuming PE ratio of Abhimaan Ltd remains same and all assets and liabilities of Abhishek Ltd are taken over at book value)
q 4) Calculate - No. of shares , EPS , B.Value if after acquisition abhimaan ltd decided to :
a) Issue bonus shares in the ratio of 1:2
b) Split the stock as Rs 5 each fully paid.
Now i need the answers for all of the questions. Furthur it would be really helpful if you can provide me some idea about free float market capitalisation.
Prompt reply will be much appreciated.
Thanks .
CAclubindia
