CIMA F3 Exam With Confidence Using Practice Dumps

A company has just received a hostile bid.  Which of the following response strategies could be considered?

A company has:

   • A price/earnings (P/E) ratio of 10.

   • Earnings of $10 million.

   • A market equity value of $100 million.

The directors forecast that the company's P/E ratio will fall to 8 and earnings fall to $9 million.

Which of the following calculations gives the best estimate of new company equity value in $ million following such a change?

A)

B)

C)

D)

Option A

Option B

Option C

Option D

An unlisted company wishes to obtain an estimated value for its shares in anticipation of a private sale of a large parcel of shares.

Relevant data for the unlisted company:

   • It has a residual dividend policy. 

   • It has earnings that are highly sensitive to underlying economic conditions.

   • It is a small business in a large industry where there are listed companies but there are none with a similar capital structure. 

The company intends to base valuations on the cost of equity of a proxy company after adjusting for any differences in capital structure where appropriate.

Which of the following methods is likely to give the most accurate equity value for this unlisted company?