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CIMA Exam CIMAPRA19-F03-1 Topic 7 Question 70 Discussion

Actual exam question for CIMA's CIMAPRA19-F03-1 exam
Question #: 70
Topic #: 7
[All CIMAPRA19-F03-1 Questions]

An unlisted company.

* Is owned by the original founders and members of their families

* Pays annual dividends each year depending on the cash requirements of the dominant shareholders.

* Has earnings that are highly sensitive to underlying economic conditions.

* Is a small business in a large Industry where there are listed companies with comparable capital structures

Which of the following methods is likely to give the most accurate equity value for this unlisted company?

Show Suggested Answer Hide Answer
Suggested Answer: C

by Carey at Jul 08, 2023, 12:55 AM

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Trina
1 months ago
I'm just wondering if the dominant shareholders are going to share any of those juicy dividends with the rest of us. Asking for a friend, of course.
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Apolonia
1 months ago
Net asset valuation? Really? This is no lemonade stand, this is a serious business we're talking about here. Let's keep it professional, folks.
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Myra
2 months ago
Discounted cash flow analysis is always a solid choice, especially when you factor in the market value of debt. This company sounds like it could use a bit more rigor in its valuation.
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Ellsworth
6 days ago
C: Dividend valuation model may not be as accurate for this type of unlisted company.
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Portia
8 days ago
B: I agree, especially for a company with earnings sensitive to economic conditions.
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Yuette
18 days ago
A: I think using the discounted cash flow analysis at WACC plus the market value of debt would give the most accurate equity value.
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Elinore
2 months ago
I'm not sure the dividend valuation model is the way to go. With a small business in a large industry, the comparable P/E approach might give a more accurate picture of the equity value.
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Nida
2 months ago
The dividend valuation model seems like the obvious choice here given the company's focus on paying dividends to its dominant shareholders. The high sensitivity to economic conditions is also a plus for this approach.
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Harris
21 hours ago
A) Dividend valuation model.
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Evette
5 days ago
D) Discounted cash flow analysis at WACC (based on cash flows after tax but before financing) plus the market value of debt.
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Tyisha
11 days ago
C) P/E based valuation using the P/E of a similar company.
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Alecia
16 days ago
B) Net asset valuation
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Kirk
2 months ago
A) Dividend valuation model.
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Tony
2 months ago
I'm not sure, I think using the P/E of a similar company might also give a good estimate of the equity value. It's important to consider all options before making a decision.
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Javier
2 months ago
I agree with Carmen. The discounted cash flow analysis takes into account the future cash flows of the company, which would be more accurate than just looking at dividends or net assets.
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Carmen
2 months ago
I think the most accurate equity value for this unlisted company would be calculated using the discounted cash flow analysis at WACC plus the market value of debt.
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Kandis
2 months ago
I'm not sure, I think using the P/E of a similar company might also give a good estimate of the equity value. It's a tough choice between C and D.
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Carol
2 months ago
I agree with Arlette. The discounted cash flow analysis takes into account the future cash flows of the company, which would be more accurate than just looking at dividends or net assets.
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Arlette
3 months ago
I think the most accurate equity value for this unlisted company would be calculated using the discounted cash flow analysis at WACC plus the market value of debt.
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