CIMA Exam CIMAPRA19-F03-1 Topic 6 Question 29 Discussion

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

Question #: 29
Topic #: 6

CompanyA has made an offer to acquire CompanyZ.

Both companies are quoted and their current market share prices are:

* CompanyA- $4

* CompanyZ- $5

Shareholders in companyZhave been given three alternative offers:

* Cash of $5.50 per share

* Shareforshareexchangeonthebasisof3for2

* 10.5% longdatedbondforevery20shares

The bond is has a nominal value of $100 and the expected yield on bonds of similar risk is 10%.

You are advising a CompanyZshareholder on the three offers.

She requires a 15% premium if she is to accept the offer.

In providing your advice, whichof the following statements is correct?

AThe bond offer is only worth $100 which represents a zero premium and should be rejected.

BThe bond offer is above the minimum threshold and should be accepted.

CThe share for share exchange is the only offer which is above the acceptance threshold.

DThe value of the consideration given by the cash and bond offers is certain, unlike the share offer.

Show Suggested Answer

Suggested Answer: C

by Alex at May 06, 2022, 03:06 PM

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