CIMA F3 Online Access

Company X plans to acquire Company Y.

Pre-acquisition information:

Post-acquisition information:

Total combined earnings are expected to increase by 10%

Total combined P/E multiple will remain at 10 times

Which of the following share-for-share exchanges will result in an increase of 10% in Company X's share price post-acquisition?

A company is wholly equity funded. It has the following relevant data:

   • Dividend just paid $4 million

   • Dividend growth rate is constant at 5%

   • The risk free rate is 4%

   • The market premium is 7%

   • The company's equity beta factor is 1.2

Calculate the value of the company using the Dividend Growth Model.

Give your answer in $ million to 2 decimal places.

$ ?  million

Company A, a listed company, plans to acquire Company T, which is also listed.

 Additional information is:

   • Company A has 100 million shares in issue, with market price currently at $8.00 per share.

   • Company T has 90 million shares in issue, with market price currently at $5.00 each share.

   • Synergies valued at $60 million are expected to arise from the acquisition.

   • The terms of the offer will be 2 shares in A for 3 shares in B.

Assuming the offer is accepted and the synergies are realised, what should the post-acquisition price of each of Company A's shares be?

Give your answer to two decimal places.

$ ?  .

A large, listed company in the food and household goods industry needs to raise $50 million for a period of up to 6 months.

It has an excellent credit rating and there is almost no risk of the company defaulting on the borrowings. The company already has a commercial paper programme in place and has a good relationship with its bank.

Which of the following is likely to be the most cost effective method of borrowing the money?