CIMA F3 Exam With Confidence Using Practice Dumps

An all equity financed company plans an issue of new ordinary shares to the general public to raise finance for a new project

The following data applies:

• 10 million ordinary shares are currently in issue with a market value of S3 each share

• The new project will cost S2.88 million and is expected to give a positive NPV of S1 million

• The issue will be priced at a AaA discount to the current share price.

What gam or loss per share will accrue to the existing shareholders?

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 listed publishing company owns a subsidiary company whose business activity is training.

It wishes to dispose of the subsidiary company.

The following information is available:

The board of the publishing company believe that the value of the subsidiary company, and hence the value of the equity invested in it, can be determined by calculating the present value of the subsidiary's free cashflows.

Which of the following is the most appropriate discount rate to use when determining the enterprise value of the company?