Jay-Balan Electronics is considering making an offer to purchase Ambani Electronics. Their financial analyst has gather the following data:
Jay-Balan: Price Earnings/Ratio 11, Shares in issue 1 100 000, Earnings (after tax) 2 200 000, dividends 650 000
Ambani: Price Earnings/Ratio 8, Shares in issue 500 000, Earnings (after tax) 570 000, dividends 270 000..
Jay-Balan expects the earnings and dividend of Badlands to grow at a constant rate of 4.5% each year. Jay-Balan's management believe that the acquisition of Ambani will provide them with economies of scale that would increase this grows to 7,5%pa.
A0 What is the value of Ambani to Jay Balan?
Calculate Jay-Balan's gain from his acquisition?
If Jay Balan offeres R19 in cash for each share, what would be the NPV of the acquisition
What should be the most the Jay Balan should be willing to pay in cash to acquire the shares belonging to Ambani?