CIMAPRA19-F03-1 Exam - Topic 5 Question 2 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 2
Topic #: 5

Company E is a listed company. Its directors are valuing a smaller listed company, Company F, as a possible acquisition.

The two companies operate in the same markets and have the same business risk.

Relevant data on the two companies is as follows:

Both companies are wholly equity financed and both pay corporate tax at 30%.

The directors of Company E believe they can "bootstrap" Company F's earnings to improve performance.

Calculate the maximum price that Company E should offer to Company F's shareholders to acquire the company.

Give your answer to the nearest $million.

A3,150

B1,890

C4,500

D2,700

Show Suggested Answer

Suggested Answer: A

by Carmela at May 09, 2022, 11:23 AM

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5 months ago

Company E should consider the tax implications in their valuation.

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I'm a little confused on this one. Is it Continual improvement? That's about constantly looking for ways to optimize the IT services, which could include reducing incidents. But I'm not 100% sure. Guess I'll have to think it through carefully.

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Chana

5 months ago

This question seems straightforward, but I want to make sure I understand the key terms like "control environment" and "control points" before answering.

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CIMAPRA19-F03-1 Exam - Topic 5 Question 2 Discussion

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