Company A is planning to acquire Company B by means of a cash offer. The directors of Company B are prepared to recommend acceptance if a bid price can be agreed. Estimates of the net present value (NPV) of future cash flows for the two companies and the combined group post acquisition have been prepared by Company A's accountant. There are as follows:

What is the maximum price that Company A should offer for the shares in Company B?
Give your answer to the nearest $ million

Correct Answer:

150

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A listed company with a growing share price plans to finance a four-year research project with debt.
The main criterion for the finance is to minimise the annual cashflow payments on the debt.
The research will be sold at the end of the project.
Which of the following would be the most suitable financing method for the company?

• A.Standard bonds
• B.Finance lease
• C.Bank loan
• D.Bonds with warrants

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A company aims to increase profit before interest and tax (PBIT) each year.
The company reports in A$ but has significant export sales priced in B$.
All other transactions are priced in A$.
In 20X1, the company reported:

In 20X2, the only changes expected are:
* An increase in export prices of 10%, but no change to units sold.
* A rise in the value of the B$ to A$/B$ 2.500 (that is, A$ 1 = B$ 2.5) Is it likely that the company would still meet its objective to grow PBIT between 20X1 and 20X2?

• A.No, PBIT would fall by A$ 48 million.
• B.Yes, PBIT would increase by A$ 150 million.
• C.No, PBIT would fall by A$ 150 million.
• D.Yes, PBIT would increase by A$ 48 million.

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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.Stay the same since US$ risk can already be quantified from segmental analysis disclosures included elsewhere in the annual report.
• 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.Increase due to greater clarity of information available on the extent of US$ risks and how they are managed.

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The International Integrated Reporting Council (IIRC) was formed in August 2010 and brings together a cross-section of representatives from a wide variety of business sectors.
The primary purpose of the IIRC's framework is to help enable an organsation to communicate how it:

• A.contributes positively to the economic well being of the environment in which it operates.
• B.ensures that the conflicting needs of different stakeholder groups are met in an optimal manner.
• C.minimises the environmental impact of its business processes.
• D.creates value in the short, medium and long term.

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