Coke Ltd is considering purchase of Pepsi Ltd. Coke Ltd has 3 lac shares outstanding with a market price of Rs. 30 per share whereas Pepsi Ltd has 2 lacs shares outstanding each selling at Rs. 20 per share. EPS are Rs. 4 and Rs. 2.25 per share (Coke Ltd and Pepsi Ltd respectively). Managements of both companies are discussing two proposals for exchanging shares as (i) in proportion to relative EPS for these companies (ii) 0.5 Coke Ltd: 1 Pepsi Ltd (0.5:1). You are required to compute: (a) EPS, post-merger, both alternative (b) Share impact on EPS for shareholders of two companies under both alternatives
Coke Ltd is considering purchase of Pepsi Ltd. Coke Ltd has 3 lac shares outstanding with a market price of Rs. 30 per share whereas Pepsi Ltd has 2 lacs shares outstanding each selling at Rs. 20 per share. EPS are Rs. 4 and Rs. 2.25 per share (Coke Ltd and Pepsi Ltd respectively). Managements of both companies are discussing two proposals for exchanging shares as (i) in proportion to relative EPS for these companies (ii) 0.5 Coke Ltd: 1 Pepsi Ltd (0.5:1). You are required to compute: (a) EPS, post-merger, both alternative (b) Share impact on EPS for shareholders of two companies under both alternatives
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Coke Ltd is considering purchase of Pepsi Ltd. Coke Ltd has 3 lac shares outstanding with a
market price of Rs. 30 per share whereas Pepsi Ltd has 2 lacs shares outstanding each selling
at Rs. 20 per share. EPS are Rs. 4 and Rs. 2.25 per share (Coke Ltd and Pepsi Ltd respectively).
Managements of both companies are discussing two proposals for exchanging shares as (i) in
proportion to relative EPS for these companies (ii) 0.5 Coke Ltd: 1 Pepsi Ltd (0.5:1).
You are required to compute:
(a) EPS, post-merger, both alternative
(b) Share impact on EPS for shareholders of two companies under both alternatives
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