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Exam F3 All Questions
Exam F3 All Questions

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CIMA Strategic F3 Question # 20 Topic 3 Discussion

F3 Exam Topic 3 Question 20 Discussion:
Question #: 20
Topic #: 3

An unlisted company wishes to obtain an estimated value for its shares in anticipation of a private sale of a large parcel of shares.

 

Relevant data for the unlisted company:

   • It has a residual dividend policy. 

   • It has earnings that are highly sensitive to underlying economic conditions.

   • It is a small business in a large industry where there are listed companies but there are none with a similar capital structure. 

 

The company intends to base valuations on the cost of equity of a proxy company after adjusting for any differences in capital structure where appropriate.

 

Which of the following methods is likely to give the most accurate equity value for this unlisted company?


A.

Dividend valuation model.


B.

Discounted cash flow analysis at WACC based on free cash flow to equity. 


C.

Net asset valuation.


D.

P/E based valuation using the P/E of a similar listed company in the same industry.


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