. 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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