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CIMAPRA19-F03-1 Exam - Topic 6 Question 57 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 57
Topic #: 6
[All CIMAPRA19-F03-1 Questions]

NNN is a company financed by both equity and debt. The directors of NNN wish to calculate a valuation of the company's equity and at a recent board meeting discussed various methods of business valuation.

Which THREE of the following are appropriate methods for the directors of NNN to use in this instance?

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Suggested Answer: A, B, E

by Novella at Sep 18, 2022, 04:52 AM

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Tammara
7 months ago
Wait, can you really just use total earnings like that?
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Lavelle
7 months ago
E is solid too, cash flow to equity is key.
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Carisa
7 months ago
C seems off, why not account for debt?
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Nina
7 months ago
I think B is the way to go, it considers WACC!
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Izetta
8 months ago
A is definitely a classic method for equity valuation.
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Abel
8 months ago
I’m uncertain about the difference between cash flow to all investors and cash flow to equity. I hope I can remember which one to choose in this context!
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Mozell
8 months ago
I practiced a similar question where we discussed cash flow to all investors discounted at WACC. I believe that one is definitely relevant here.
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Gladis
8 months ago
I think cash flow to equity discounted at the cost of equity is a valid method, but I’m a bit confused about how debt factors into the valuation.
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Alise
8 months ago
I remember that using total earnings and a price-earnings ratio is a common method, but I'm not sure if it's always appropriate for valuing equity directly.
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Ilda
8 months ago
Hmm, I'm a bit unsure about this one. I know slideshows are commonly used for mobile ads, but I'm not sure I can confidently identify the specific advantage they offer. I'll have to make an educated guess.
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Rasheeda
8 months ago
I think spend analysis should be the priority here. That's what we practiced in the case studies, right?
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Tamesha
8 months ago
Okay, let's think this through step-by-step. The question is asking about the difference in gearing ratios between LM and JK, and we have four potential explanations to choose from.
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