CIMA F3 Exam With Confidence Using Practice Dumps

KKL is a listed sports clothing company with three separate business units. KKL is seeking to sell TT’, one of these business units

TTP cwns a new. brand of trail running shoes that have Droved hugely popular with lone distance runners. The management team of TTP are frustrated by the constraints imposes b/ KKL in managing tie brand and developing. the bus ness and they believe that TTF has huge growth potential.

The management team of TTP have approached KKL with a proposal to purchase 1~P through a management layout (MDO). KKL has accepted this proposal as TTP has not proved to be a good fit' with the rest of the business and has agreed on the selling price.

Which THREE of the following factors a-e mast Likely to affect the success of the MBO?

An unlisted company is attempting to value its equity using the dividend valuation model.

Relevant information is as follows:

   • A dividend of $500,000 has just been paid.

   • Dividend growth of 8% is expected for the foreseeable future.

   • Earnings growth of 6% is expected for the foreseeable future.

   • The cost of equity of a proxy listed company is 15%.

   • The risk premium required due to the company being unlisted is 3%.

The calculation that has been performed is as follows:

Equity value = $540,000 / (0.18 - 0.08) = $5,400,000

What is the fault with the calculation that has been performed?

Company Z has identified four potential acquisition targets: companies A, B, C and D.

Company Z has a current equity market value of $590 million.

The price it would have to pay for the equity of each company is as follows:

Only one of the target companies can be acquired and the consideration will be paid in cash.

The following estimations of the new combined value of Company Z have been prepared for each acquisition before deduction of the cash consideration:

Ignoring any premium paid on acquisition, which acquisition should the directors pursue?