IAI Actuarial Core Principles · Business Finance · Corporate growth, restructuring and divestment
Kaveri Ltd has 10 million shares at ₹80 each, and Surya Ltd has 4 million shares at ₹50 each. Kaveri offers Surya's shareholders a 30% premium over the current price, paid in cash. What is the total consideration?
The total consideration is ₹260 million. The premium is applied to Surya's own share price of ₹50, giving ₹65 per share, and this is multiplied by Surya's 4 million shares. Kaveri's own share price is irrelevant to a cash offer.
- A₹200 million
- B₹240 million
- C₹260 millionCorrect
- D₹320 million
- ₹416 million
Explanation
The offer price per share is 50 × 1.30 = ₹65. Multiply by 4 million shares to get ₹260 million. The ₹200 million figure ignores the premium; ₹416 million wrongly applies the premium to Kaveri's price (80 × 1.3 × 4 million).
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