CIMA Exam CIMAPRA19-F03-1 Topic 5 Question 48 Discussion

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

Question #: 48
Topic #: 5

CompanyA is located in Country A, where the currency is the A$.

It is listed on the local stock market which was set up 10 years ago.

It plans a takeover of Company B, which is located in CountryB where the currency is the B$, and where the stock market has been operating for over 100 years.

CompanyA is considering how to finance the acquisition, and how the shareholders of CompanyB might respond to a share exchange or cash (paid in B$).

Which of the followingislikely to explain why the shareholders ofCompanyB wouldprefera share exchange as opposed to a cash offer?

AIt would allow them to realise their investment and make a capital gain.

BIt would avoid them being exposed to foreign currency risk.

CThey would receive shares in a market that is likely to be more efficient.

DIt would enable them to benefit from the future performance of the combined entity.

Show Suggested Answer

Suggested Answer: D

by Lisha at May 09, 2022, 01:08 AM

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