CIMA Exam CIMAPRA19-F03-1 Topic 3 Question 52 Discussion

Listed company R is in the process of making a cash offer for the equity of unlisted company S.

Company R has a market capitalisation of $200 million and a price/earnings ratio of 10.

Company S has a market capitalisation of $50 million and earnings of $7 million.

Company R intends to offer $60 million and expects to be able to realise synergistic benefits of $20 million by combining the two businesses. This estimate excludes the estimated $8 million cost of integrating the two businesses.

Which of the following figures need to be used when calculating thevalue of the combined entity in $ millions?