Spring Sale Limited Time 75% Discount Offer - Ends in 0d 00h 00m 00s - Coupon code = simple75
Pass the CIMA Strategic F3 Questions and answers with Dumpstech
Extracts from a company's profit forecast for the next financial year is as follows:
Since preparing the forecast, the company has decided to return surplus cash to shareholders by a share repurchase arrangement.
The share repurchase would result in the company purchasing 20% of the 2,000 million ordinary shares currently in issue and cancelling them.
Assuming the share repurchase went ahead, the impact on the company's forecast earnings per share will be an increase of:
The competition authorities are investigating the takeover of Company Z by a larger company, Company Y.
Both companies are food retailers.
The takeover terms involve using a part cash, part share exchange means of payment.
Company Z is resisting the bid, arguing that it undervalues its business, while lobbying extensively among politicians to sway public opinion against the bidder.
Which of the following actions by Company Y is most likely to persuade the competition authorities to approve the acquisition?
Company A is located in Country A, where the currency is the A$.
It is listed on the local stock market which was set up 10 years ago.
It plans a takeover of Company B, which is located in Country B where the currency is the B$, and where the stock market has been operating for over 100 years.
Company A is considering how to finance the acquisition, and how the shareholders of Company B might respond to a share exchange or cash (paid in B$).
Which of the following is likely to explain why the shareholders of Company B would prefer a share exchange as opposed to a cash offer?
A company plans to cut its dividend but is concerned that the share price will fall. This demonstrates the _____________ effect
A company is planning a new share issue.
The funds raised will be used to repay debt on which it is currently paying a high interest rate.
Operating profit and dividends are expected to remain unchanged in the near future.
If the share issue is implemented, which THREE of the following are most likely to increase?
A company has:
• 10 million $1 ordinary shares in issue
• A current share price of $5.00 a share
• A WACC of 15%
The company holds $10 million in cash. No interest is earned on this cash.
It will invest this in a project with an expected NPV of $4 million.
In a semi-strong efficient stock market, which of the following is the most likely share price immediately after the announcement of the new investment?
Company P is a large unlisted food-processing company.
Its current profit before interest and taxation is $4 million, which it expects to be maintainable in the future.
It has a $10 million long-term loan on which it pays interest of 10%.
Corporate tax is paid at the rate of 20%.
The following information on P/E multiples is available:
Which of the following is the best indication of the equity value of Company P?
On 1 January:
• Company X has a value of $50 million
• Company Y has a value of $20 million
• Both companies are wholly equity financed
Company X plans to take over Company Y by means of a share exchange. Following the acquisition the post-tax cashflow of Company X for the foreseeable future is estimated to be $8 million each year. The post-acquisition cost of equity is expected to be 10%.
What is the best estimate of the value of the synergy that would arise from the acquisition?
A company intends to sell one of its business units, Company R by a management buyout (MBO).
A selling price of $100 million has been agreed.
The managers are discussing with a bank and a venture capital company (VCC) the following financing proposal:
The VCC requires a minimum return on its equity investment in the MBO of 30% a year on a compound basis over 5 years.
What is the minimum TOTAL equity value of Company R in 5 years time in order to meet the VCC's required return?
Give your answer to one decimal place.
$ ? million
Company A has agreed to buy all the share capital of Company B.
The Board of Directors of Company A believes that the post-acquisition value of the expanded business can be computed using the "boot-strapping" concept.
Which of the following most accurately describes "boot-strapping" in this context?
