CIMA Exam CIMAPRA19-F03-1 Topic 1 Question 92 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam

Question #: 92
Topic #: 1

NNN is a company financed by both equity and debt. The directors of NNN wish to calculate a valuation of the company's equity and at a recent board meeting discussed various methods of business valuation.

Which THREE of the following are appropriate methods for the directors of NNN to use in this instance?

ATotal earnings multiplied by a suitable price-earnings ratio.

BCash flow to all investors discounted at WACC less the value of debt.

CCash flow to all investors discounted at WACC.

DCash flow to equity discounted at the cost of equity less the value of debt.

ECash flow to equity discounted at the cost of equity.

Show Suggested Answer

Suggested Answer: A, B, E

by Kathrine at Jul 16, 2024, 03:02 PM

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Van

6 months ago

A is just too easy, man. I'm all about that complex discounted cash flow wizardry. B, C, and E for the win!

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Loreta

6 months ago

Hmm, tough choice, but I think I'll go with B, C, and E. Keeping it simple with the cash flows, you know?

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Jerlene

7 months ago

I'm going with B, C, and D. Can't forget about that all-important cost of equity!

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Louvenia

5 months ago

D is definitely important to factor in the cost of equity.

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Theola

6 months ago

C seems like a solid option too, taking into account the WACC.

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Wendell

6 months ago

I think B is a good choice, considering the value of debt.

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8 months ago

I think option A is a good method because it considers the company's earnings.

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