F3 Exam Dumps : Financial Strategy

Company A plans to acquire Company B, an unlisted company which has been in business for 3 years.

It has incurred losses in its first 3 years but is expected to become highly profitable in the near future.

No listed companies in the country operate the same business field as Company B, a unique new high-risk business process.

The future success of the process and hence the future growth rate in earnings and dividends is difficult to determine.

Company A is assessing the validity of using the dividend growth method to value Company B.

 Which THREE of the following are weaknesses of using the dividend growth model to value an unlisted company such as Company HHG?

A company is owned by its five directors who want to sell the business.  

Current profit after tax is $750,000.  

The directors are currently paid minimal salaries, taking most of their incomes as dividends.

After the company is sold, directors' salaries will need to be increased by $50,000 each year in total.

A suitable Price/Earnings (P/E) ratio is 7, and the rate of corporate tax is 20%.

What is the value of the company using a P/E valuation?

SUP is a large supermarket chain. It produces many 'own brand' goods in Country S where the parent company is located. These goods are sold in SUP's supermarkets in Country S as well as being sold at a 'transfer price' to SUP companies located in foreign countries for sale in the SUP supermarkets located in that country.

Which of the following factors is the most important for SUP from a lax planning and compliance viewpoint when setting prices for the 'own brand' goods sold to other group companies'?