TCs Ltd. acquires HCL Ltd., MPS of HCL Ltd. Is Rs.20 and EPS is Rs. 5 for an exchange ratio of 1.5: 1, what was the PE ratio used in acquiring HCL Ltd.?
A)rs. 4
B)rs. 5
C)rs. 6
D)rs. 2.67

Question

Quizplus · Accepted Answer

The PE ratio is calculated as Market Price per Share (MPS) divided by Earnings per Share (EPS). Here, PE ratio = Rs. 20 / Rs. 5 = 4. However, considering the exchange ratio of 1.5:1, the effective PE ratio becomes 6 (4 * 1.5).

TCs Ltd Acquires HCL Ltd