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
- 85.05 cr
- 211.05 cr
- 111.25 cr
- 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?
- 2 shares of Mark Ltd. for 6 shares of Mask Ltd
- 1 share of Mark Ltd. for 5 shares of Mask Ltd
- 3 shares of Mark Ltd. for 3 shares of Mask Ltd
- 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
- 5.24 per share
- 4.12 per share
- 5.42 per share
- 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?
- 5,00,00,000
- 2,00,00,000
- 1,50,00,000
- 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
- 50L
- 30L
- 25L
- 40L
Answer: 1
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