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