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CIMA Strategic F3 Question # 70 Topic 8 Discussion

F3 Exam Topic 8 Question 70 Discussion:
Question #: 70
Topic #: 8

Company AD is planning to acquire Company DC. It is evaluating two methods of structuring the terms of the bid, which will be ether a debt-funded cash offer or a share exchange

The following Information is relevant

• The two companies are of similar size and in related industries

• AB's gearing ratio measured as debt to debt plus equity, is currently 30% based on market values. This Is the company's optimum capital structure set to reflect the risk appetite of shareholders.

• The combined company is expected to generate savings and synergies

Which THREE of the following are advantages to AB's shareholders of a debt-funded cash offer compared with a share exchange?
A.

Shareholder control will remain with AB’s current shareholders

B.

More of the synergistic benefits of the acquisition will accrue to AB's current shareholders.

C.

Gearing will increase.

D.

EPS Mil Increase

E.

WACC will increase f credit worthless falls too low, further increasing the returns to shareholders.

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Actual exam question for CIMA F3 exam by Axel97032 at May 3, 2026, 5:50:22 PM

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