ACCA_P4_2012年6月试题答案.pdfVIP

Answers Professional Level – Options Module, Paper P4 Advanced Financial Management June 2012 Answers 1 REPORT TO THE BOARD OF DIRECTORS, NENTE CO IMPACT OF THE TAKEOVER PROPOSAL FROM MIJE CO AND PRODUCTION RIGHTS OF THE FOLLOW-ON PRODUCT The report considers the value of the takeover to Nente Co and Mije Co shareholders based on a cash offer and on a share-for-share offer. It discusses the possible reaction of each group of shareholders to the two offers and how best to utilise the follow-on product opportunity. The significant assumptions made in compiling the report are also explained. The appendices to the report show the detailed calculations in estimating the equity value of Nente Co, the value to Nente Co and Mije Co shareholders of acquiring Nente Co by cash and by a share-for-share exchange, and the value to Nente Co of the exclusive rights to the follow-on product. The results of the calculation are summarised below: Estimated price of a Nente Co share before the takeover offer and follow-on product £2·90/share (appendix i) Estimated increase in share price Nente Co Mije Co Cash offer (appendix ii) 1·7% 9·4% Share-for-share offer (appendix ii) 17·9% 6·9% Estimate of the value per share of the follow-on product to Nente Co 8·7% (appendix iii) It is unlikely that Nente Co shareholders would accept the cash offer because it is little more than the estimated price of a Nente Co share before the takeover offer. However, the share-for-share offer gives a larger increase in value of a share of 1