Exam 20: Mergers

Which two terms correctly complete the following statement: "DVM models are based on the premise that the market value of ordinary shares represents the sum of the , discounted to a ."?

Last year a company had earnings per share of 20p. A year ago the share price was 200p. This year's earnings are likely to be 30p, and the share price today is 250p. What is the historical PER?

What should an investor pay for shares in which the rate of return for the risk class is 10 per cent, a dividend of 44p will be paid after 1 year, and the share price after 1 year is expected to be 220p?

Which three of the following are assets which contribute to a firm's value for shareholders but cannot be objectively measured?

Which two of the following are factors that explain why many of the most respected investors pay little attention to macroeconomic forecasts when valuing companies?

Which three of the following are models of income valuation?

The dividend paid by a company in each year over an 8- year period rises gradually from 50p in the first year of the period to 75p in the final year. What is the average annual growth rate over the period?

What are the two key conclusions that Arnold makes about valuation?

Which of the following is calculated using the ratio d1/E1 ? kE - g

Which three of the following are most likely to have an effect on a company's growth rate?

Which model requires the discounting of the company's future owner earnings which are standard reported earnings after tax plus non- cash charges less the amount of expenditure on plant, machinery, and working capital needed for the firm to maintain its long- term competitive position and its unit volume, and to make investment in all new value- creating projects?

For a particular share a dividend of 20p will be paid after 1 year, at which time the share is expected to be sold for 250p. If the risk class justifies a rate of return of 20 per cent, how much should an investor pay for the shares today?

Calculate the PER for the following company. It is expected to maintain a payout ratio of 40 per cent of earnings. The appropriate discount rate for this risk class is 10 per cent and the expected growth rate in earnings and dividends is 5 per cent.

Which three of the following are the benefits most likely to be achieved during a takeover?

Which two terms correctly complete the following statement: "The NAV approach to valuation focuses on values, which may be adjusted to reflect values."?

Which of the ratios is used to calculate historical PER?

Which three of the following factors influence the rate of dividend growth?

For which one of the following would net asset value be the most inappropriate measure of share value?

Which three of the following are examples of companies where income- flow- based methods of valuation are not especially useful?

Which three of the following accurately relate to the net asset value approach to valuation?