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Corporate Valuation in Mergers & Acquisitions

The document contains four questions related to corporate valuation and mergers and acquisitions. Question 1 asks about EPS and PE ratios for two companies Axis Ltd and Dena Ltd and how they would change given a merger. Question 2 provides financial data for Arvind Ltd and Vijay Ltd and asks to calculate values before and after an acquisition. Question 3 asks to calculate the EVA of TCS Ltd given financial information. Question 4 provides partial financial data for Ojha Ltd and asks to calculate missing values including sales margin, capital turnover, ROI, and EVA.

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Apurva Ramteke
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67 views2 pages

Corporate Valuation in Mergers & Acquisitions

The document contains four questions related to corporate valuation and mergers and acquisitions. Question 1 asks about EPS and PE ratios for two companies Axis Ltd and Dena Ltd and how they would change given a merger. Question 2 provides financial data for Arvind Ltd and Vijay Ltd and asks to calculate values before and after an acquisition. Question 3 asks to calculate the EVA of TCS Ltd given financial information. Question 4 provides partial financial data for Ojha Ltd and asks to calculate missing values including sales margin, capital turnover, ROI, and EVA.

Uploaded by

Apurva Ramteke
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd

Subject: Corporate Valuation & Merger Acquisition

Topic: Business Restructuring & EVA


Date: 1st November 2023

Q1: Axis Ltd. is intending to acquire Dena Ltd. by merger and the following
information is available in respect of the companies.

Particulars Axis Ltd Dena Ltd


Equity Share Capital of Rs.10 each (Rs. Lakhs) 450 90
Earnings after Tax (Rs. Lakhs) 90 18
Market Price per share (Rs.) 60 46
Required:
1. What is the present EPS of both the companies?
2. What is the present Price Earning Ratios (P/E Ratios) of both the companies?
3. If the proposed merger takes place, what would be the new EPS for Axis Ltd.
(assuming that the merger takes place by exchange of equity shares and the
exchange ratios is based on the current market prices)
4. What should be the exchange ratio if, Axis Ltd. wants to ensure the same EPS
to members as before the merger takes place? (10)

Q2: Arvind Limited wants to acquire Vijay Limited. Exchange ratio is decided as 14/39
i.e. 0.359 The following financial data is available:

Particulars Axis Ltd Dena Ltd


Profit After Tax (PAT) Rs.9,00,000 Rs.1,80,000
Number of Shares 3,00,000 90,000
Market Price Pers share Rs.36 Rs.20
Calculate:
1) EPS and PE Ratio of both the firms before acquisition.
2) The number of equity shares required to be issued by Arvind for acquiring
Vijay.
3) EPS of Arvind after acquisition.
4) Market price of share of Arvind after acquisition; assuming PE Ratio remains
unchanged.
5) The market value of the merged entity. (10)

Q3: From the following information, compute EVA of TCS Ltd. (Assume 35% tax
rate)
1) Equity Share Capital = Rs. 1,000 Lakhs
2) 12% Debenture = Rs. 500 Lakhs
3) Cost of Equity = 20%
4) Financial Leverage = 1.5 times (10)
Q4: From the following data pertaining to Ojha Ltd. for the year ended 31st March,

2010 you are required to calculate the missing figures:

Particulars Amount
Sales Value Rs.40,00,000
Income Rs. 8,00,000
Average Investment Rs.10,00,000
Sales Margin (%) ?
Capital Turnover (times) ?
R.O.I. (%) ?
Economic Value Added (Rs.) ?
Weighted Average Cost of Capital 10%
(10)

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