The directors of Pep Limited have appointed you as a merger and acquisition specialist. They are considering the acquisition of Guardiola Limited. You are to advise them whether or not to proceed with the project. The following information is available: - Pep Limited Guardiola Limited Market price per share R5.00 R4.00 Earnings per share R2.2 R1.8 No. of shares issued 3 000 000 2 000 000 - Cash payment of R7 million to Guardiola Limited - Synergy benefits of R3 million will accrue to the acquisition Required: Assume the acquisition is based on market values with a cash payment. 4.1 Calculate the combined value of the proposed acquisition. 4.2 Calculate the net present value of the proposal. 4.3 Calculate the acquisition premium. 4.4 Calculate the post-acquisition market price of the share. 4.5 Calculate the post-acquisition increaseldecrease price of the share. 4.6 Identify and explain SIX (6) advantages associated with a Merger and Acquisition.
The directors of Pep Limited have appointed you as a merger and acquisition specialist. They are considering the acquisition of Guardiola Limited. You are to advise them whether or not to proceed with the project. The following information is available: - Pep Limited Guardiola Limited Market price per share R5.00 R4.00 Earnings per share R2.2 R1.8 No. of shares issued 3 000 000 2 000 000 - Cash payment of R7 million to Guardiola Limited - Synergy benefits of R3 million will accrue to the acquisition Required: Assume the acquisition is based on market values with a cash payment. 4.1 Calculate the combined value of the proposed acquisition. 4.2 Calculate the net present value of the proposal. 4.3 Calculate the acquisition premium. 4.4 Calculate the post-acquisition market price of the share. 4.5 Calculate the post-acquisition increaseldecrease price of the share. 4.6 Identify and explain SIX (6) advantages associated with a Merger and Acquisition.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:QUESTION 4
The directors of Pep Limited have appointed you as a merger and acquisition specialist. They are considering the
acquisition of Guardiola Limited. You are to advise them whether or not to proceed with the project.
The following information is available: -
Pep Limited
Guardiola Limited
Market price per share
R5.00
R4.00
Earnings per share
R2.2
R1.8
No. of shares issued
3 000 000
2 000 000
- Cash payment of R7 million to Guardiola Limited
- Synergy benefits of R3 million will accrue to the acquisition
Required:
Assume the acquisition is based on market values with a cash payment.
4.1
Calculate the combined value of the proposed acquisition.
4.2
Calculate the net present value of the proposal.
4.3
Calculate the acquisition premium.
4.4
Calculate the post-acquisition market price of the share.
4.5
Calculate the post-acquisition increase/decrease price of the share.
4.6
Identify and explain SIX (6) advantages associated with a Merger and Acquisition.
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