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F3 Financial Strategy Questions 49–56 (page: 8)

A venture capitalist has made an equity investment in a private company and is evaluating possible methods by which it can exit the investment over the next 3 years. The private company shareholders comprise the four original founders and the venture capitalist.   Advise the venture capitalist which THREE of the following methods will enable it to exit its equity investment?

Company F's current profit before interest and taxation is $5.0 million. It has a 10% long-term corporate bond in issue with a nominal value of $10 million. Corporate tax is paid at 25%. The industry average P/E multiple is 10. Company X has made an approach to acquire the entire share capital of Company F for $30 million. Company X has announced that anticipated synergies (after interest and taxation) arising from its acquisition of Company F will be $1 million each year in perpetuity. 
Advise the Board of Directors of Company F if the bid should be accepted, based on the above information?

Company U has made a bid for the entire share capital of Company B. Company U is offering the shareholders in Company B the option of either a share exchange or a cash alternative.
Advise the shareholders in Company B which THREE of the following would be considered disadvantages of accepting the cash consideration?

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?

A company has accumulated a significant amount of excess cash which is not required for investment for the foreseeable future. It is currently on deposit, earning negligible returns.
The Board of Directors is considering returning this excess cash to shareholders using a share repurchase programme. The majority of shareholders are individuals with small shareholdings.
Which THREE of the following are advantages of the company undertaking a share repurchase programme? 

An unlisted company which is owned and managed by its original founders has accumulated excess cash following many years of profitable trading. The Board of Directors is comprised of the four original founders who each hold 25% of the equity share capital.
Which THREE of the following will be significant considerations when deciding on the company's dividend policy? 

Modigliani and Miller are the main proponents of the view that the dividend policy is irrelevant to the value of a company's shares. They argue that a company that continually reinvests its entire earnings would generate the same shareholder wealth if it engaged in a policy of high dividends and financed its expansion with funds obtained from rights issues.
Which THREE of the following statements are assumptions that are required in order to support this proposition?  

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?