Free CIMAPRA19-F03-1-ENG Mock Exam – Practice Online Confidently

A company has just received a hostile bid. Which of the following response strategies could be considered? 

Extracts from a company's profit forecast for the next financial year as follows:Since preparing the forecast, the company has decided to return surplus cash to shareholders by a sharerepurchase arrangement.The share repurchase would result in the company purchasing 20% of the 1,250 million ordinary sharescurrently in issue and canceling them.Assuming the share repurchase went ahead, the impact on the company's forecast earnings per share will be anincrease of: 

A company has just received a hostile bid. Which of the following response strategies could be considered? 

An analyst has valued a company using the free cash flow valuation model.The analyst used the following data in determining the value: • Estimated free cashflow in 1 year's time = $100,000 • Estimated growth in free cashflow after the first year = 5?ch year indefinitely • Appropriate cost of equity = 10%The result produced by the analyst was as follows:Value of equity = $100,000 (1+0.05)/0.10 = $1,050,000The analyst made a number of errors in determining the value. By how much has the analyst undervalued the company? 

An unlisted company operates in a niche market, exploring the west coast of Africa for new oiI reservoirs.The oil exploration program has been successful in recent years and t now has a substantial amount of oilreserves with a high level of certainty of being recoverable Under financial reporting regulations, oil still in theground is not recognised as an asset unit is extracted.The expense of the exploration program has used up all the company’s available cash resources.The company has denied to list or a stock market and raise finds through an initial public offering to financeits drilling program.Which of the following valuation methods in the appropriate to use in calculating an initial listing price for thiscompany?