CIMA Exam CIMAPRA19-F03-1 Topic 1 Question 43 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 43
Topic #: 1

The Board of Directors of a listed company wish to estimate a reasonable valuation of the entire share capital of the company in the event of a takeover bid.

The company's current profit before taxation is $4.0 million.

The rate of corporate tax is 25%.

The averageP/Emultiple of listed companies in the same industry is 8 times current earnings.

TheP/E multiple of recent takeovers in the same industry have ranged from 9 times to 10 times current earnings.

The averageP/Emultiple of the top 100 companies on the stock market is 15 times current earnings.

Advise the Board of Directors which of the following is a reasonable estimate of a range of values of the entire share capital in the event of a bid being made for thewhole company?

AMinimum = $36 million, and maximum = $40 million.

BMinimum = $27 million, and maximum = $30 million.

CMinimum = $32 million, and maximum = $60 million.

DMinimum = $24 million, and maximum = $45 million.

Show Suggested Answer

Suggested Answer: B

by Avery at May 03, 2022, 07:53 AM

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