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| Certification Vendor: | CIMA (Chartered Institute of Management Accountants) |
|---|---|
| Exam Name: | F3 Financial Strategy |
| Exam Number: | CIMAPRA19-F03-1 |
| Exam Duration: | 90 minutes |
| Exam Format: | Multiple Choice, Hot Spot, Number Entry, Computer-Based Objective Test, Drag and Drop, Multiple Response |
| Passing Score: | 100/150 (scaled score) |
| Real Exam Qty: | 60 |
| Available Languages: | English |
| Related Certifications: | Strategic Case Study (SCS) CIMA Professional Qualification Strategic Level CGMA (Chartered Global Management Accountant) |
| Sample Questions: | CIMA CIMAPRA19-F03-1 Sample Questions |
| Exam Way: | On-demand computer-based exam delivered through Pearson VUE test centers and online remote proctoring where available. |
| Pre Condition: | Typically undertaken after completing the Management Level (E2, P2, F2 and Management Case Study) or through approved exemptions. |
| Official Syllabus URL: | https://hub.cimaglobal.com/proqual/2019/strategic/F3 |
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CIMA F3 exam is a comprehensive exam that covers a range of financial strategy topics. It is essential for anyone who wants to work in management accounting or financial management and requires a significant amount of preparation. With the right study resources and dedication, candidates can successfully pass the exam and take the next step in their professional development.
NEW QUESTION # 337
Company MB is in negotiations to acquire the entire share capital of Company BBA. Information about each company is as follows:
It is expected that Company BBA's profit before interest and tax will be $30 million in each of the two years after acquisition. Company AAB is considering how best to structure the offer Company AAB's discount factor and appropriate cost of equity for use in valuing Company BBA is 10% Shareholders taxation implications should be ignored Which of the following provides the shareholders of Company BBA with the highest offer price?
Answer: C
Explanation:
CIMA F3 requires acquisition offers to be evaluated from the target shareholders' perspective, comparing the present value (PV) of each alternative using appropriate valuation techniques. Shareholder tax is ignored, and future cash flows must be discounted at the acquiring company's cost of equity, which is given as 10%.
Step 1: Establish baseline information
Company BBA
Shares in issue: 40 million
Current share price: $7.20
Market value = 40m × 7.20 = $288 million
Company AAB
Shares in issue: 100 million
Share price: $12.00
Step 2: Evaluate each offer
Option A - Cash offer of $290m now
PV = $290 million
Option B - Cash offer at 105% of BBA share price
Offer price per share:
7.20×1.05=7.567.20 \times 1.05 = 7.567.20×1.05=7.56
Total value:
7.56×40m=$302.4m7.56 \times 40m = \$302.4m7.56×40m=$302.4m
PV = $302.4 million
Option C - Share-for-share exchange
Offer ratio: 5 AAB shares for every 8 BBA shares
Value per BBA share:
58×12=7.50\frac{5}{8} \times 12 = 7.5085×12=7.50
Total value:
7.50×40m=$300m7.50 \times 40m = \$300m7.50×40m=$300m
PV = $300 million
Option D - Cash now plus profit-based earn-out
Immediate cash = $270 million
Additional payment: 60% of BBA's PBIT for two years
Annual PBIT = $30m
Annual earn-out:
30m×60%=18m30m \times 60\% = 18m30m×60%=18m
Total earn-out over 2 years:
18m×2=36m18m \times 2 = 36m18m×2=36m
Discounted value of earn-out (paid at end of Year 2):
36(1.10)2=361.21#29.75m\frac{36}{(1.10)
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