An unlisted company wishes to obtain an estimated value for its shares in anticipation of a private sale of a large parcel of shares.
Relevant data for the unlisted company:
* It has a residual dividend policy.
* It has earnings that are highly sensitive to underlying economic conditions.
* It is a small business in a large industry where there are listed companies but there are none with a similar capital structure.
The company intends to base valuations on the cost of equity of a proxy company after adjusting for any differences in capital structure where appropriate.
Which of the following methods is likely to give the most accurate equity value for this unlisted company?
On 31 October 20X3:
* A company expected to agree a foreign currency transaction in January 20X4 for settlement on 31 March 20X4.
* The company hedged the currency risk using a forward contract at nil cost for settlement on 31 March 20X4.
* The transaction was correctly treated as a cash flow hedge in accordance with IAS 39 Financial Instruments: Recognition and Measurement.
On 31 December 20X3, the financial year end, the fair value of the forward contract was $10,000 (asset).
How should the increase in the fair value of the forward contract be treated within the financial statements for the year ended 31 December 20X3?
A company has forecast the following results for the next financial year:
The following is also relevant:
* Profit after tax for the year can be assumed to be equivalent to free cash flow for the year.
* Debt finance comprises a $10 million floating rate loan which currently carries an interest rate of 5%.
* $400,000 investment in non-current assets is required to achieve required growth, all of which is to financed from next year's free cash flow.
* The company plans to pay a dividend of $150,000 next year, financed from next year's free cash flow.
The company is concerned that interest rates could rise next year to 6% which could then affect their investment plans.
If interest rates were to rise to 6% and the company wishes to maintain its dividend amount, the planned investment expenditure will decrease by:
Company A plans to acquire Company B in a 1-for-1 share exchange.
Pre-acquisition information is as follows:
Post-acquisition information is as follows:
* Annual earnings are expected to increase by $4 million.
* The P/E multiple of the combined company is expected to be 12 times.
If the acquisition proceeds, what is the expected percentage increase in the post acquisition share price of Company A?
Company A is a listed company that produces pottery goods which it sells throughout Europe. The pottery is then delivered to a network of self employed artists who are contracted to paint the pottery in their own homes.
Finished goods are distributed by network of sales agents.The directors of Company A are now considering acquiring one or more smaller companies by means of vertical integration to improve profit margins.
Advise the Board of Company A which of the following acquisitions is most likely to achieve the stated aim of vertical integration?
