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Dear Tutor,
when calculating the PE ratio based on the Share for share exchange why do we not consider the value of shares of Tidded. For example if the 5 x 3 shares is offered the calculation of the SP per answer is 12,19×5/3. Why do we not take the value of Tidded shares. Based on the data available it could be calculated eps x P/E (128/90×15,9) = $22,61.
Therefore 5 shares in Louieed at price $12,19 =60,95 for 3 shares in Tidded at price $22,61 = 67,83, therefore value per share is 128,78/8 =16,1.Could you please clarify it for me?
Thank you.
Please tell me which exam the question was in (I can’t remember the name of every question in every exam 🙂 )
It is because the requirement asks for the PE ratio implied by the proposed offers.
You seem to be assuming that they will end up with 5 shares in Louieed and 3 shares in Tidded. That is not the case – they will end up with 5 shares in Louieed instead of their 3 shares in Tidded.
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