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John i have few queries realted to this question please help me out with these problems.
Since the question ask to calculate P/E ratio of T Co implied by terms of L intial and proposed offer. i repeat john its p/E ratio of T is asked with the terms of L. Then why in solution T shares are valued by price of L shares. i.e. $ 12.19 . i feel like it should be valued according to T and calculate p/e ration and then it adjusts with implied terms of L. please explain ?
2. In part c it says no extra finance is required if T shareholder take up the share offer.John can you please that with maybe from workings or else how it says that no extra finance is required ?
3.In comments it says if all five shareholder realise their investment instead of two the required cash is incrased by 512m. In its working how and from where they got 25% ?
Thanks in Advance.
1. They have used the value of L shares because if (for example) it is the 2 shares for 1 offer, then the value being placed on a T share is the value of 2 L shares.
2. If all the shareholders take up the share offer, then no cash will need to be paid. It is only if they need to pay cash that they will need extra finance to be able to afford the cash.
3. The five shareholders own 45% of the shares and that of them, three own 20%. So the other two must own 25%.
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