Question 46
Company Z has just completed the all-cash acquisition of Company A.
Both companies operate in the advertising industry.
The market considered the acquisition a positive strategic move by Company Z.
Which THREE of the following will the shareholders of Company Z expect the company's directors to prioritise following the acquisition?
Question 47
A company is considering either directly exporting its product to customers in a foreign country or setting up a subsidiary in the foreign country to manufacture and supply customers in that country.
Details of each alternative method of supplying the foreign market are as follows:
There is an import tax on product entering the foreign country of 10% of sales value.
This import duty is a tax-allowable deduction in the company's domestic country.
The exchange rate is A$1.00 = B$1.10
Which alternative yields the highest total profit after taxation?
Question 48
The Board of Directors of a listed company have decided that it needs to increase its equity capital to ensure it is in a more stable financial position.
The shareholder profile is a mix of institutional and individual small shareholders.
The board is considering either:
* A scrip dividend
* A zero dividend
Which THREE of the following would be considered disadvantages of a scrip dividend compared to a zero dividend?
Question 49
BBA is a wholly owned subsidiary of AAB BBA operates in country B where the currency is the B$.
The following is an extract from BBA's financial statements at 31 December 20X1:
The following Information is relevant:
" The bonds were trading at $110 per $100 on 31 December 20X1. "Operating profit of BBA for the year ended 31 December 20X1 was S15 million
* The P/E ratio is 8
* Corporate income tax rate is 20%.
The tax authorities m country B Implemented thin capitalisation rules based on the level of gearing of the subsidiary, calculated as book value o( debt lo book value of equity The cut-off point for gearing used by the tax authorities for a company to be thinly capitalised is 75%.
Which of the following statements is correct as at 31 December 20X1?
Question 50
A company based in Country D, whose currency is the D$, has an objective of maintaining an operating profit margin of at least 10% each year.
Relevant data:
* The company makes sales to Country E whose currency is the E$. It also makes sales to Country F whose currency is the F$.
* All purchases are from Country G whose currency is the G$.
* The settlement of all transactions is in the currency of the customer or supplier.
Which of the following changes would be most likely to help the company achieve its objective?