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NEW QUESTION 44
A company is reporting under IFRS 7 Financial Instruments: Disclosures for the first time and the directors are concerned about whether this will lead to the disclosure of information that could affect the company's share price.
The company is based in a country that uses the A$ but 40% of revenue relates to export sales to the USA and priced in US$.
When the company reports under IFRS 7 for the first time, the share price is most likely to:

A. Increase due to greater clarity of information available on the extent of US$ risks and how they are managed.B. Either increase or decrease depending on market reaction to new information on how financial risk is managed.C. Decrease since investors place a lower value on higher risk businesses.D. Stay the same since US$ risk can already be quantified from segmental analysis disclosures included elsewhere in the annual report.

Answer: B

 

NEW QUESTION 45
The competition authorities are investigating the takeover of Company Z by a larger company, Company Y.
Both companies are food retailers.
The takeover terms involve using a part cash, part share exchange means of payment.
Company Z is resisting the bid, arguing that it undervalues its business, while lobbying extensively among politicians to sway public opinion against the bidder.
Which of the following actions by Company Y is most likely to persuade the competition authorities to approve the acquisition?

A. Company Y increases the cash element of its bid offer.B. Company Y agrees to dispose of specified outlets which geographically overlap those of Company Z.C. Company Y undertakes to pass on any cost savings to customers.D. Company Y guarantees to preserve employment at its cental distribution depot.

Answer: B

 

NEW QUESTION 46
A company needs to raise $20 million to finance a project.
It has decided on a rights issue at a discount of 20% to its current market share price.
There are currently 20 million shares in issue with a nominal value of $1 and a market price of $5 per share.

Calculate the terms of the rights issue.

A. 1 new share for every 25 existing sharesB. 1 new share for every 20 existing sharesC. 1 new share for every 5 existing sharesD. 1 new share for every 4 existing shares

Answer: D

 

NEW QUESTION 47
Assume today is 31 December 20X1.
A listed mobile phone company has just launched a new phone which is proving to be a great success.
As a direct result of the product's success, earnings are forecast to increase by:
* 5% a year in each of years 20X2 - 20X6
* 3% from 20X7 onwards
Market analysts were very excited to hear the news of the success of the product and future growth forecasts.
Assuming a semi-efficient market applies, which of the following company valuation methods is likely to give the best estimate of the company's equity value today?

A. Today's share price x number of shares in issue.B. Today's share price x number of shares in issue + retained earnings.C. Discounted free cash flow using the company's forecast growth rates.D. P/E valuation based on the company's long term P/E and earnings for the year ended 31 December
20X1.

Answer: A

 

NEW QUESTION 48
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