CIMA Financial Strategy F3 Question # 19 Topic 2 Discussion

CIMA Financial Strategy F3 Question # 19 Topic 2 Discussion

F3 Exam Topic 2 Question 19 Discussion:
Question #: 19
Topic #: 2

Company ABC is planning to bid for company DDD, an unlisted company in an unrelated industry sector to ABC.

 

The directors of ABC are considering a number of different valuation methods for DDD before making a bid.

 

Which of the following is the MOST appropriate method for ABC to use to value DDD?


A.

Using DDD's tangible assets.


B.

Applying an industry P/E ratio to DDD's forecast earnings.


C.

Discounting DDD's forecast cash flows using ABC's cost of equity.


D.

Applying Company ABC's P/E ratio to DDD's forecast earnings.


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