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CIMA Exam CIMAPRA19-F03-1 Topic 7 Question 72 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 72
Topic #: 7
[All CIMAPRA19-F03-1 Questions]

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.

Show Suggested Answer Hide Answer
Suggested Answer: C

by Shalon at Aug 10, 2023, 02:38 PM

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Rupert
2 months ago
Alright, time to put on my accountant's hat and crunch some numbers. Let's see which answer option is the right 'bootstrap' to climb to the top.
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Annamae
8 days ago
Finally, we can calculate the maximum price that Company E should offer to Company F's shareholders.
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Billy
25 days ago
Now we can calculate the earnings after tax for Company F.
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Felix
1 months ago
Let's start by calculating the earnings before interest and tax for Company F.
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Annamaria
2 months ago
Gotta love these corporate acquisition questions. It's like a game of financial Tetris, trying to fit all the pieces together.
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Lovetta
2 months ago
Hmm, I wonder if there's a hidden joke about 'bootstrapping' a smaller company. Maybe they'll throw in a punchline about pulling oneself up by the bootstraps?
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Isidra
2 months ago
The key seems to be understanding the impact of the 'bootstrap' effect on Company F's earnings. This will determine the maximum price that Company E should offer.
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France
1 days ago
The 'bootstrap' effect on Company F's earnings is crucial here.
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Launa
2 days ago
Company E needs to calculate the maximum price they should offer for Company F.
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Lacey
4 days ago
Let's calculate the maximum price using the relevant data provided for both companies.
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Cecily
7 days ago
The maximum price that Company E should offer to acquire Company F is crucial for the success of the deal.
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Yolando
8 days ago
I think the tax rate and the risk of both companies are important factors to consider in this calculation.
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Alica
21 days ago
We need to consider how 'bootstraping' Company F's earnings will affect the acquisition price.
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Brice
2 months ago
User 2
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Sunshine
2 months ago
User 1
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Nobuko
2 months ago
I believe the answer is D) 2,700 because Company E can use their expertise to enhance Company F's earnings.
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Marguerita
3 months ago
I agree, Company E needs to consider how they can improve Company F's performance before making an offer.
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Krystina
3 months ago
I think the maximum price should be calculated based on Company F's earnings potential.
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