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. To determine the cost of acquisition: Highlands Ltd....

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Question

Accounting

. To determine the cost of acquisition:

Highlands Ltd. currently has an earnings per share (EPS) of US 2.00 but is determined to report an EPS of US 2.67 and therefore acquires Olympia Ltd. The relevant acquisition information is provided below:

Highlands Ltd.

Olympia Ltd.

Earnings per share (EPS)

Sh. 2.00

Sh. 2.50

Market price per share (MPS)

Sh. 40

Sh. 25

Price to earnings (P/E) ratio

20

10

Number of shares

100,000

200,000

Total earnings

Sh. 200,000

Sh. 500,000

Total market value

Sh. 4,000,000

Sh. 5,000,000

Required:

i. Compute the cost of the merger to Highlands Ltd.

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