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NOS in A = 50m
NOS in B =30m
sp A= $4.2
sp B = $2.8A acquired B and purchase all of A’s shares.
So, the share exchange will be for every 2 shares acquired in B, A will issue 3 shares. Am i right?so the total NOS after acquisition = 50m+(30/2*3) = 95m
however, why the answer is like this.
the share exchange is 2 for 3 issue.
total NOS after acquisition = 50m+(30/3*2)=70mIf by ‘sp’ (???) you mean the market value per share, then you are not right.
What you are writing would mean that for 2 shares in B worth 2 x $2.80 = $5.60 they would receive 3 shares in A worth 3 x $4.20 = $12.60 !!!!
In fact what will happen is that for 3 shares in B worth 3 x $2.80 = $8.40 they will receive 2 shares in A also worth 2 x $4.20 = $8.40, which makes rather more sense 🙂
So the answer to whatever question you are looking at is correct – the total number of shares after the acquisition will be 70m.
tanjingwei: Please start a new thread when you are asking about a different topic. TERP calculations are nothing to do with this thread.
The explanation of the calculation of the TERP is covered, with examples, in our free lectures – the lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
For question practice it is essential that you buy a Revision Kit from one of the ACCA Approved Publishers. They are full of past exam and other exam standard questions, including, obviously, questions on calculating the TERP.
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