Acquisition and mergers (2)

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July 27, 2019 at 5:59 pm #525064
Saimon
Participant
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Louieed Co ( Mar/Jun 16), Requirement “C”

When calculation gearing ratio of Louieed co for each of the 3 option given on question examiner used Louieed co’s P/E ratio of 14

If i use combined company’s P/E ratio then will my result be wrong???

Combined company’s P/E ratio = ((14*296)+(15.9*128))/(296+128)=14.57
July 27, 2019 at 8:27 pm #525075
John Moffat
Keymaster
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You would be wrong, because the question specifically stated thatchy expect Louieed’s PE ratio to remain unchanged after the acquisition.
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