F3 Exam Dumps - Financial Strategy

Company M plans to bid for Company J. Company M has 20 million shares in issue and a current share price of $10.00 before publicly announcing the planned takeover. Company J has 10 million shares in issue and a current share price of $4.00.

The directors of Company M are considering an all-share bid of 1 Company M shares for 2 Company J shares.

Synergies worth $20m are expected from the acquisition.

 

What is the likely change in wealth for Company M's shareholders (in total) if the bid is accepted?

 

Give your answer to the nearest $ million.

 

$  ? million 

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

 Additional information is:

   • Company A has 150 million shares in issue, with market price currently at $7.00 per share.

   • Company T has 120 million shares in issue,. with market price currently at $6.00 each share.

   • Synergies valued at $50 million are expected to arise from the acquisition.

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

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.

An entity prepares financial statements to 30 June.

During the year ended 30 June 20X2 the following events occurred:

 

1 July 20X1

   • The entitiy borrowed $100 million at a variable rate of interest.

   • In order to protect itself against the variability of its interest cashflows, the entity entered into a pay-fixed-receive-variable interest swap with annual settlements.  The fair value of the swap on this date was zero.

30 June 20X2

   • The entity received a net settlement of $2 million under the swap. After this net settlement, the fair value of the swap was $5 million - a financial asset.

The entity decides to use hedge accounting for this arrangement and has designated it as a cash flow hedge.  The swap is a perfect hedge of the variability of the cash interest payments.

 

Which of the following describes the treatment of the settlement and the change in the fair value of the swap in the statement of profit or loss and other comprehensive income for the year ended 30 June 20X2?

A venture capitalist is considering investing in a management buy-out that would be financed as follows:

• Equity from managers

• Equity from a venture capitalist

• Mezzanine debt finance from a venture capitalist

• Senior debt from a bank

The venture capitalist is planning to work with the management to grow the business in anticipation of an initial public offering within five years.

However, the cash forecast shows a potential shortage of funds in the first year and the venture capitalist is evaluating the potential impact of cash being generated in the first year being significantly lower than forecast.

The most important risk that a shortage of cash would create for the management buyout is that the new company has insufficient funds to:

The primary objective of a public sector entity is to ensure value for money is generated.

Value for money is defined as performing an activity so as to simultaneously achieve economy, efficiency and effectiveness

Efficiency is defined as:

A company has recently announced a scrip issue of 1 new share for every 4 existing shares. The market value of each share price before the announcement was $20.00.

What is the best estimate of the share price after the scrip issue ignoring all other influences on the share price?

Company J plans to acquire Company K, an unlisted company whose equity is to be valued using a P/E ratio approach. 

A listed company has been identified which is very similar to Company K and which can be used as a proxy.

However, the growth prospects of Company K are higher than those of the proxy.

The Directors of Company J are aware that certain adjustments will be necessary to the proxy company's P/E ratio in order to obtain a more reliable valuation.  

 

The following adjustments have been agreed:

   • 20% due to Company K being unlisted.

   • 15% to allow for the growth rate difference.

The total adjustment to the proxy p/e ratio is: