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The following information is available about Rufus Inc and Wedge Co.
Rufus Inc has made an offer to buy all the share capital of Wedge Co, on a P/E ratio valuation of 10. This has been accepted by the Wedge shareholders. The purchase consideration will be two-thirds in new shares of Rufus Inc and one-third in cash. Rufus will raise the cash by borrowing at 10% interest. The value of Rufus shares will be taken at their current market price. What will be the share exchange element of the purchase consideration? A. 2 Rufus shares for 1 Wedge share. B. 5 Rufus shares for 4 Wedge shares. C. 3 Rufus shares for 2 Wedge shares. D. 1 Rufus share for 2 Wedge shares. |