Company M plans to bid for Company J. Company M has 20 million shares in issue and a current share price of $10.00 before publicly announcing the planned takeover. Company J has 10 million shares in issue and a current share price of $4.00.
The directors of Company M are considering an all-share bid of 1 Company M shares for 2 Company J shares.
Synergies worth $20m are expected from the acquisition.
What is the likely change in wealth for Company M's shareholders (in total) if the bid is accepted?
Give your answer to the nearest $ million.
$ ? million
A company gas a large cash balance but its directors have been unable to identify any positive NPV projects to invest in. Which THREE of the following are advantages of a share repurchase, compared with a one-off large dividend?
The shares of a company in a high technology industry have been listed on a stock exchange for 10 years. During this period, it has paid no dividends but invested all retained earnings in growth. The company is now entering a period of relatively stable growth and the directors are considering beginning to pay dividends They are reviewing the following suggestions made by members of the board:
• Pay cash dividends linked to growth in earnings
• Use a residual theory approach to establish cash dividends
• Issue scrip dividends (shares instead of cash)
• Continue to pay no dividends as dividends are irrelevant to the value of the company
Which THREE of the following are correct statements for the directors to take into consideration when making a decision about future dividend policy?
Company R is a major food retailer. It wishes to acquire Company S, a food manufacturer.
Company S currently supplies many stores owned by Company R with food products that it manufactures.
Company S is of similar size to Company R but has a lower credit rating.
Which of the following is most likely to be a synergistic benefit to R on purchasing S?
TESTED 27 Apr 2024
