MCQ for CA Final SFM - Chapter 9 Mergers, Acquisitions and Corporate Restructuring

Sample Multiple Choice Questions (MCQ's) for CA Final - Paper 2 - Strategic Financial Management - Chapter 9: Mergers, Acquisitions and Corporate Restructuring - For Practice relevant for May/Nov 23 Examinations

 

Q:1 P Ltd. is considering take-over of R Ltd. by the exchange of four new shares in P Ltd. for every five shares in R Ltd. The relevant financial details of the two companies prior to merger announcement are as follows:

 

Profit before Tax(₹ crore)

P Ltd

R Ltd

No. of Shares (Crore)

15

13.50

P/E Ratio

25

15

Corporate Tax Rate 30%

12

9

From the above information you are required to determine Market value of both the companies

 

  1. 85.05 cr
  2. 211.05 cr
  3. 111.25 cr
  4. 281.05 cr

Answer: 2

 

Q:2 The following information is provided related to the acquiring Firm Mark Limited and the target Firm Mask Limited:

 

Firm Mark Limited 

Firm Mark Limited 

Earning after tax (₹) 

2,000 lakhs

400 lakhs

Number of shares outstanding 

200 lakhs

100 lakhs

P/E ratio (times)

10 

5

What is the Swap Ratio based on current market prices?

 

  1. 2 shares of Mark Ltd. for 6 shares of Mask Ltd
  2. 1 share of Mark Ltd. for 5 shares of Mask Ltd
  3. 3 shares of Mark Ltd. for 3 shares of Mask Ltd
  4. 1 share of Mark Ltd. for 8 shares of Mask Ltd

Answer: 2

 

Q:3 MK Ltd. is considering acquiring NN Ltd. The following information is available:

Company 

Earning after Tax (₹)

No. of Equity Shares 

Market Value Per Share (₹) 

MK Ltd.

60,00,000

12,00,000

200.00

NN Ltd. 

18,00,000

3,00,000

160.00

Exchange of equity shares for acquisition is based on current market value as above. There is synergy advantage available.

Find the earning per share for company MK Ltd. after merger

 

  1. 5.24 per share 
  2. 4.12 per share
  3. 5.42 per share 
  4. 4.52 per share 

Answer: 3

 

Q:4 Reliable Industries Ltd. (RIL) is considering a takeover of Sunflower Industries Ltd. (SIL) The particulars of 2 companies are given below:

 

Particulars 

Reliable Industries Ltd

Sunflower Industries Ltd.

Earnings After Tax (EAT)

₹ 20,00,000

₹ 10,00,000

Equity shares O/s

10,00,000

10,00,000

Earnings per share (EPS)

2

1

PE Ratio (Times)

10

5

What is the market value of Company RIL before merger?

 

  1. 5,00,00,000
  2. 2,00,00,000
  3. 1,50,00,000
  4. 4,00,00,000

Answer: 2

 

Q:5 Reliable Industries Ltd. (RIL) is considering a takeover of Sunflower Industries Ltd. (SIL). The particulars of 2 companies are given below:

Particulars 

Reliable Industries Ltd

Sunflower Industries Ltd.

Earnings After Tax (EAT)

₹ 20,00,000

₹ 10,00,000

Equity shares O/s

10,00,000

10,00,000

Earnings per share (EPS)

2

1

PE Ratio (Times)

10

5

Market value of Company SIL before Merger

 

  1. 50L
  2. 30L
  3. 25L
  4. 40L

Answer: 1

 

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