CIMA Exam CIMAPRA19-F03-1 Topic 7 Question 90 Discussion

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

Question #: 90
Topic #: 7

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 Misty at Jul 05, 2024, 06:04 AM

Limited Time Offer

25%

Off

Get Premium CIMAPRA19-F03-1 Questions as Interactive Web-Based Practice Test or PDF

Contribute your Thoughts:

Submit Cancel

Hillary

3 months ago

D looks pretty solid too, as long as they properly account for the debt. Can't forget the cost of equity!

upvoted 0 times

...

Tamar

3 months ago

Haha, I bet the directors are really sweating this one. Better not forget about that pesky debt, am I right?

upvoted 0 times

Billye

2 months ago

D) Cash flow to equity discounted at the cost of equity less the value of debt.

upvoted 0 times

...

Lawrence

3 months ago

B) Cash flow to all investors discounted at WACC less the value of debt.

upvoted 0 times

...

Susana

3 months ago

A) Total earnings multiplied by a suitable price-earnings ratio.

upvoted 0 times

...

Eleonore

4 months ago

I like C and E - gotta focus on that cash flow to all investors, not just equity.

upvoted 0 times

Jannette

3 months ago

C) Cash flow to all investors discounted at WACC.

upvoted 0 times

...

Hannah

3 months ago

B) Cash flow to all investors discounted at WACC less the value of debt.

upvoted 0 times

...

German

3 months ago

A) Total earnings multiplied by a suitable price-earnings ratio.

upvoted 0 times

...

Torie

3 months ago

C) Cash flow to all investors discounted at WACC.

upvoted 0 times

...

Raul

3 months ago

B) Cash flow to all investors discounted at WACC less the value of debt.

upvoted 0 times

...

Gail

3 months ago

A) Total earnings multiplied by a suitable price-earnings ratio.

upvoted 0 times

...

Erick

4 months ago

B, C, and E seem like reasonable options here. I'd avoid A since it doesn't account for the debt financing.

upvoted 0 times

Vilma

3 months ago

Yes, A doesn't consider the debt, so it's not the best choice here.

upvoted 0 times

...

Lai

3 months ago

I agree, B, C, and E are the most appropriate methods for valuation in this case.

upvoted 0 times

...

Leonard

4 months ago

I believe option C is the most appropriate method for valuation.

upvoted 0 times

...

Nathan

5 months ago

I agree, but I also think option B could be useful.

upvoted 0 times

...

Van

5 months ago

I think option A is a good method to use for valuation.

upvoted 0 times

...