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 based in Country D, whose currency is the D$, has an objective of maintaining an operating profit margin of at least 10% each year. 

Relevant data:

   • The company makes sales to Country E whose currency is the E$. It also makes sales to Country F whose currency is the F$. 

   • All purchases are from Country G whose currency is the G$.

   • The settlement of all transactions is in the currency of the customer or supplier.

Which of the following changes would be most likely to help the company achieve its objective?

A company plans to raise $12 million to finance an expansion project using a rights issue.

Relevant data:

• Shares will be offered at a 20% discount to the present market price of $15.00 per share.

• There are currently 2 million shares in issue.

• The project is forecast to yield a positive NPV of $6 million.

What is the yield-adjusted Theoretical Ex-Rights Price following the announcement of the rights issue?